EMI’s stock price still falling

Doubts continue to surround Terra Firma deal

EMI’s stock price continued to tumble Wednesday as doubts about financing continued to surround the buyer, private equity firm Terra Firma.

With the clock ticking for shareholder approval, EMI shares dropped 13.5% to 247.75 pence ($5.08). Terra Firma’s offer is $5.43 per share.

The British press has reported that Terra Firma’s lender, Citigroup, wants to renegotiate terms of the deal, especially if Terra Firma does not get 90% shareholder approval by Sunday. It’s possible Citigroup will continue with the deal, just at a higher interest rate.

About 26% of the shareholders have approved the sale, which is being financed with a $5.12 billion loan from Citigroup. Most of EMI’s stock is in hedge fund portfolios.

Traditionally, lenders will OK a deal with 80% acceptance. Terra Firma is facing a deadline of 1 p.m. Friday in London for electronic acceptances and 1 p.m. Sunday for all others.

Since the deal was OK’d in May, debt markets have tightened up following the collapse of the sub-prime mortgage market in the U.S. Citigroup reportedly needs more time to syndicate the debt — that is, find banks and other lenders who will assume part of the loan.

If Citigroup nixes the deal, it would be a significant blow to EMI chairman Eric Nicoli, who has seen more than a half-dozen merger-takeover attempts fail in the past seven years.Several U.S. banks have decided not to lend any more money to private equity until the deals waiting to be syndicated are completed.

In the U.S., London-based EMI has the smallest market share, about 10%, among the four major distributors of recorded music. Its music publishing division, however, is one of the strongest. Company owns Capitol, Virgin and Blue Note Records, the catalogs of the Beatles and the Beach Boys and a current roster that includes Coldplay, Norah Jones and the Rolling Stones.

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