MUSIC group EMI slashed annual losses by two-thirds – but said it needs millions of pounds in the years to come to fend off lenders.
Pre-tax losses at the group – which has artists including Coldplay, Lily Allen, Bat For Lashes and Katy Perry on its books – reduced its losses by 64% to £624m in the year to March 31.
EMI wrote off £602m on items such as its back catalogue to reflect weaker prospects.
However, revenues rose by 5% to £1.65bn after successes included the release of the remastered Beatles catalogue, which has now sold more than 13m albums.
Terra Firma, the private equity owned by Guy Hands who bought EMI for £4.2bn in 2007, was forced to raise £105m earlier this year to help the group meet covenant tests from its lender, US bank Citigroup.
EMI’s annual report said that up to £26.9m would be needed to meet tests between now and the end of 2010.
The report said: “The directors also recognise that existing forecasts indicate further significant shortfalls in respect of the covenant test periods to the end of March in each year until the facilities expire in 2014 and 2015.”
Stephen Alexander, chairman of EMI holding company Maltby Capital, said the group faced “considerable financial challenges” with more than £3bn in debt due for repayment between 2014 and 2017.
“Even though EMI generates more than enough cash to service the interest payments on its current borrowings, we need to address a set of banking covenants that tighten steadily over the coming years,” he said.
However, EMI chief executive Roger Faxon said: “The operating performance we delivered in the year under review gives us a strong platform, and I’m looking forward to working with our great staff and artists to develop the business further.”
Terra Firma is locked in a legal battle with Citigroup over the original deal three years ago before the credit crunch struck – claiming the bank “misrepresented fundamental facts” over the sale of EMI.
Citigroup denies the claims.