EMI uses catalogue to reduce debt cost

UK, April 20, 2007 - EMI hopes to shave £5m a year from its £100m annual interest bill by borrowing cheaply against the deep royalty streams of songs such as Blue Moon and Imagine.

The struggling music major has hired Deutsche Bank and Royal Bank of Scotland to lead the securitisation, which it aims to complete within a year.

Seen by some analysts as a defence against continual bid approaches, the deal will see EMI offer its publishing assets to lenders as security and raise high-leverage debt to recycle most of its existing debt, which stood at £910m net at the end of March.

To save a further £48m this year, the final dividend - forecast at 6p a share - has been scrapped as the company swallows a £125m restructuring charge and a £93m charge to buy out its Japanese partner Toshiba.

''In view of the company's funding requirements, the board has decided to suspend dividend payments until the benefits of the restructuring process have been fully realised,'' EMI said.

The news came as EMI gained some much-needed market share in the tough US market, following better performances from the likes of Corinne Bailey Rae, whose sales received a fillip after her appearance at the Grammys, three days before EMI's second profit warning of the year.

According to Nielsen Soundscan, which tracks over-the-counter US sales, EMI has added 1 percentage point in market share in the year to date and 2.5 points excluding catalogue sales - helped by Joss Stone, urban artist Mims and glossy female fiddlers Celtic Woman.

Nevertheless, EMI confirmed revenue for the year to March 2007 was expected to be down 15pc in recorded music, which continues to suffer from piracy, the decline in CD sales, and the poor recent performance of Robbie Williams.

The company refused to comment on how much it hopes to save as a result of a securitisation but said revenue in music publishing is expected to be broadly flat.

Having rejected fresh approaches from US rival Warner Music this year, EMI gave long-suffering shareholders cause for cheer regarding earnings. It expects to report underlying group earnings ahead of market expectations at £174m, helped by faster than expected cost cuts.

The shares, down 19pc this year before yesterday, had the biggest gain in almost five months to close up 10½ at 225¾p.

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