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Citigroup May Save Jackson From Debt Woes
Friday, February 17, 2006
By Roger Friedman
Jackson Bank Deal: Will Citigroup Save Him?
As Michael Jackson considers a new deal that could save him, Neverland may no longer be insured, the zoo animals are looking for a new home, and staff remains unpaid after eight weeks.
Michael Jackson’s perilous financial problems, documented here ad nauseum as they say, could be improving soon. I say ‘could be’ because with Jackson, you never know whether he will accept the deals worked out by bankers and lawyers or turn up his battered nose at them. Remember, last year he snubbed a deal that could have bailed him out and he chose insolvency.
My sources now say that Sony Music has worked out a deal with Fortress Investments in which Fortress would sell the $270 million worth of Jackson’s loans they bought last year from Bank of America to Citigroup, the investment arm of Citibank. Sony has played a significant role in brokering this deal because a deadline of February 20th is looming. Fortress could foreclose on Jackson starting on that date if they so chose.
Sony has done everything, I am told, to keep Fortress from shutting Jackson down. The reasoning is that Jackson’s half of Sony ATV Music Publishing could then possibly be sold at a bankruptcy auction. Even though Sony has the right to match any offer, there’s enough gray area here that the company wants to make sure no one else gets their hands on Jackson’s 50 percent.
The Sony execs who’ve worked on this with the Fortress team have not talked to Jackson. I am told all the work is done through a Bahrainian lawyer hired by Sheik Abdulla bin Hamad Al Khalifa, Prince of Bahrain and Jackson’s benefactor since the singer arrived in the island country last June. (Jackson has only been in the U.S. once, sources say, confirming our report from late November that the singer went to Los Angeles briefly.)
Prince Abdulla, as he is known, and Jackson, are currently at an odd point in their strange relationship. The prince has just returned to Bahrain from London, where he stayed at the Arab-owned Dorchester Hotel. Jackson has just arrived at the same hotel, after traveling to Germany, Italy, and France, winding up at the home of a longtime family friend over the last few days. The two men were not at the hotel at the same time and may not even have seen each other.
The prince, sources still insist, is still planning to launch a record label with Jackson called Two Seas despite definite strain in the relationship. Some of the strain may have come from Jackson, at the prince’s expense, importing about a dozen people from around the world as his Christmas guests and then showering them with gifts. The guests did not stay in the palace and never met the prince, I am told.
As for the record label: "There will be major distribution for the label," a source tells me, and hints that L.A. Reid—-despite having a bad Bahraini experience some months ago—may yet do the deal for Island/DefJam. Sony Music, I am told, is not interested.
All of this is interesting if completed, but several things have to happen first. Among them: Jackson must realize, my sources say, that this new deal does not "save" him. At best, moving the loans is a lateral move to a more hospitable lender. But Jackson will still owe the bank $270 million, and won’t be able to borrow any more money. Interest will keep mounting, as well, which Jackson will have to pay.
And there’s still the issue of the 60 employees Jackson has abandoned at his Neverland Valley Ranch. Today marked eight weeks of no pay. Electricity is turned off on much of the ranch, and there’s no heat or hot water because there’s no gas in the tanks. Ranch manager Joe Marcus is now working only part time at Neverland and living down in Arizona.
But there may be a new problem at Neverland, as well. Sources say that in a deposition given last November by Alan Whitman, Jackson’s accountant, it was revealed that Jackson no longer carries commercial insurance or any kind of umbrella policy at Neverland. This may apply to the animals in Jackson’s zoo, which is why, say the sources, representatives from Marine World visited recently to evaluate the non human population for adoption. Considering they haven’t been paid in a while, I’ll bet some of the two-legged types wanted to go as well.
