TERRA FIRMA BITES THE BULLET, WRITES DOWN HALF OF EMI

Terra Firma has written down half its £2.3 billion ($3.29 billion) investment in EMI Group, according to the private-equity firm's annual review. The Wall Street Journal’s Ethan Smith characterizes the write-down as an acknowledgement that the company's value isn't likely to recover amid continuing global declines in music sales.

Terra Firma took a charge of £1.37 billion, which it attributed to the "permanent impairment in value" of investments—primarily EMI.

But there was some unlikely good news amid the gloom. For the nine months ended Dec. 31, the recorded-music division's EBITDA actually rose, and substantially, to £104 million, from £12 million the year earlier. Guy and Elio can thank Coldplay and Katy Perry for part of that, and the 2,000 people fired during that period for the rest. Less surprisingly, EBITDA from Roger Faxon’s EMI Music Publishing rose to £91 million from £81 million.

The band news is that those cash-flow gains were canceled out by interest payments on that £2.7 billion loan from Citigroup. The annual review didn't break out EMI's interest obligations for the nine-month period, Smith noted, but for the six months ended Sept. 30, the company’s payments for interest and other financial costs were £150 million, exceeding its EBITDA for that period.