Warner Music to pay $350 mil to investors

Investor windfall at WMG

NEW YORK — Warner Music Group said it would pay back $350 million to investors this fall after a summer of cost-cutting and strong operating results.

The company, which was acquired from Time Warner earlier this year in a $2.6 billion buyout led by Edgar Bronfman Jr., will distribute the cash to investors, including the private equity investors who put up the bulk of the cash for the deal, Thomas H. Lee Partners, Bain Capital and Providence Equity Partners.

“Our profitability and cost-saving initiatives are running ahead of plan,” said topper Bronfman. “Restructuring costs are lower than we budgeted, and working-capital needs are lower than forecasted.”

Warner, the smallest of the four remaining music majors, in April cut 1,000 employees, or about 20% of its workforce, as it combined parts of the Atlantic and Elektra labels and streamlined to better compete in what it called a “rapidly evolving marketplace.”

Those cuts are now bearing fruit. The company’s war chest, which had $421 million in May, grew to $519 million by the end of August, allowing the company to make the payout without taking on additional debt.

The payout should ease some of the pressure on Warner to file for an IPO to pay out investors, and quiet some of the constant talk of a merger with EMI Group.

The company said in order to make the payment, it needs to make an amendment to its credit agreement.

Time Warner retains an option to buy back 15% of the company for three years, or as much as 19.9% under certain circumstances.

Separately, Warner said it would change the end of its fiscal year to Nov. 30, from Sept. 30.

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