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Is EMI in imminent danger of collapse?

Music giant EMI is on the verge of collapse after announcing pre-tax losses of £1.75 billion for the current year. The company was acquired by Terra Firma, the investment vehicle of Guy Hands, who is a well respected investor in the City. However, his acquisition of EMI has turned sour with the company on the verge of breaking banking covenants and in danger of being taken over by the banks.

Guy Hands has written to the company's 150 investors to clarify the situation and ask investors to inject an additional £120 million to save the group. There is a deadline of June by which time investors will need to have stumped up extra capital to secure the company's future. This is not the first time that EMI has required additional capital from investors after the £4.2 billion acquisition in 2007. Investors have so far injected a further £100 million although there is no doubt the company has been impacted by the move away from physical CDs towards music downloads.

When you also take into account £800 million in finance charges, £1 billion in write-offs, a £150 million loss on derivatives and a £300 million foreign exchange loss it is easy to see why the results are so dire.

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