Warner Confirms Plans, Financing For Parlophone Merger

26 April 2013 | 2:17 pm | Scott Fitzsimons

Label seeking $820 million loan, will re-brand classical music approach

The Warner Music Group has outlined plans for integrating Parlophone into its global structure, with the major label lining up an $820 million loan and planning to launch a new classical label brand.

Warner bought Parlophone – whose roster includes Coldplay, Gorillaz and Kylie Minogue (outside of Austtralia) – earlier this year from the Universal Music Group, who were making divestments in order to meet anti-trust regulation requirements relating to their purchase of EMI. WMG's CEO Stephen Cooper has now released a memo to staff outlining the integration plans for the company, which has been circulated to a number of American media outlets. It is believed that the internal email was prompted by WMG's Securities And Exchange Commission filing for the loan.

Summarised at Billboard, Cooper expressed that the label expect Parlophone to be a frontline brand alongside Warner and Atlantic and that the brand will allow the company to “reinvigorate” its classic music approach with a new brand.

As part of the Parlophone purchase Warner picked up EMI's recorded music divisions in a number of European countries, which Cooper said will give them a stronger Continetal European roster, while the acquisition of Parkophone's complete catalogue will prompt a new global catalogue strategy.

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Much of the memo addressed the $820 million loan, of which approximately $175 will be used to pay off existing debt and redeem two secured notes (loans secured with the borrower's assets).

“With our committed financing for the transaction already in place, today we embarked on a process to ensure that our funding will be on advantageous terms,” Cooper said. “At the same time, we announced that we plan to use cash on our balance sheet to buy back some of our existing debt to help lower our total interest payments and maximise our operating flexibility.”

A source told Bloomberg that the bank arranging the financing, Credit Suisse Group AG, are held a lender meeting earlier today (Australian time) in New York. The seven-year debt will have an interest rate of 3.25 percent and lenders will need to let the back know their intention to participate by May 1.

Warner estimate the merger of Parlophone will result in annual savings of $70 million for the company from a variety of areas.

In May 2011 the Warner Music Group was bought by Len Blavatnik's Access Industries after a fierce bidding process. Last week UK newspaper ranked Blavatnik as the second wealthiest man in Britain with a fortune of £11 billion ($16.5 billion AUD).