Len may not have $$$ to buy EMI

STRAPPED FOR CASH? Len Blavatnik may not have the money to buy EMI, the N.Y. Post reports. Turns out the Russian rich guy is financing his $3.3 billion buyout of WMG, including $2 billion of debt, by having the company borrow an additional $1 billion to pay shareholders. The cash problem is exacerbated by a provision Warner has added to its new bonds that precludes it from making an acquisition of more than $1 billion in the event its debt-to-earnings ratio exceeds 4.6 to 1, analyst Anthony Canale of Covenant Review told the paper’s Josh Kosman. After the Blavatnik buyout is finalized, Warner's debt-to-earnings ratio will already bump up against that loan convenant, Canale explained, adding, "My initial conclusion is that means it cannot buy EMI." A source close to the deal said WMG would be able to cut enough costs through a tie-up with EMI that it could still fall within the ratio, but our own I.B. Bad disputed that math in his May 20 column, stating, “the assumed $350m in cost savings derived from merging EMI with another major will in fact be far less, because EMI has dramatically cut costs in recent years.” (7/19a)