Michael Jackson Bailout Said to Be Close

http://www.nytimes.com/2006/04/13/business...artner=homepage

Michael Jackson Bailout Said to Be Close

By JEFF LEEDS and ANDREW ROSS SORKIN
Published: April 13, 2006

Michael Jackson, the onetime pop-music king who has endured a lengthy slide toward insolvency, is close to a deal that would keep him from bankruptcy by refinancing hundreds of millions of dollars in loans, people briefed on the plan said last night.

As part of the transaction, he will also agree at some point in the future to give up a part of a prized asset — a song catalog that includes Beatles' hits — to the Sony Corporation, people briefed on the plan said.

Mr. Jackson, who spent years racking up debt to underwrite his lifestyle even as his music career faded, has appeared to teeter on the brink of ruin several times in recent years. Last month, he all but closed his sprawling California ranch called Neverland, a move that came after the California authorities threatened to sue over unpaid wages to ranch employees.

Mr. Jackson used his stake in the song catalog as part of the collateral for about $270 million in loans from Bank of America. The bank sold the loans last year to Fortress Investment Group, a New York-based investment company that buys distressed debt. The entire catalog, of which Mr. Jackson owns 50 percent, has been valued around $1 billion, the people briefed said.

As part of the new agreement, Fortress has agreed to provide a new $300 million loan and reduce the interest payments Mr. Jackson must make.

Under the deal he has been negotiating, Mr. Jackson would agree to provide Sony — which is co-owner of the Sony/ATV Music catalog with him — with an option to buy half his stake, or about 25 percent of the catalog, at a set price, according to the people briefed on the deal.

Should Sony execute its option on the music catalog, it would ensure that Mr. Jackson was able to pay his debts, these people said.

Executives involved in the deal cautioned last night that some details had yet to completed and that the agreement could still collapse.

Representatives for Sony and Fortress declined to comment last night. A representative for Mr. Jackson did not return a call.

But executives involved in the deal said it came after months of talks that spanned the globe, with meetings from Los Angeles to New York to London to Bahrain, where Mr. Jackson has been living at the hospitality of Sheik Abdullah, the ruler's son.

The deal also comes after years of efforts by an eclectic parade of financial advisers including the California billionaire Ronald W. Burkle and the Florida entrepreneur Alvin Malnik to offer Mr. Jackson guidance for extricating himself from his woes. Mr. Jackson's financial managers had been pressing him to shed a part of his stake in the Sony/ATV venture since before he stood trial last year on charges of child molestation. He was acquitted last summer.

Many people close to Mr. Jackson have maintained that he could raise money to repay his loans — or at least stay afloat — by touring internationally or working out a series of television and book deals. But the consensus among his advisers was that he would face bankruptcy if he did not refinance.

Sony has a longstanding interest in keeping Mr. Jackson solvent. If Fortress had moved to foreclose on Mr. Jackson, he might have been forced into bankruptcy protection, where his stake in the publishing company could be put up for auction.

In negotiating the deal, Sony seeks to avoid the prospect that another bidder could gain ownership of the stake, which the company has long hoped to control.

Sony has been trying to organize financial partners that could prop up Mr. Jackson's wobbly finances. In the fall, a Sony representative flew to Dubai to meet with Mr. Jackson and an adviser, Gaynell Lenoir, daughter of the late Gerald Lenoir, a lawyer who was a mentor to the lawyer Johnnie Cochran.

Originally, they had tried to hammer out a deal in which Citigroup would acquire the loans, and offer Mr. Jackson a more favorable interest rate, around 6 percent, these executives said. Mr. Jackson had been paying more than 20 percent in monthly interest payments.

Rather than sell the loans to Citigroup, Fortress agreed to match the bank's terms, the executives said.

The various parties had agreed to the deal in principle a few weeks ago, the executives said, but the final pact was held up while the companies involved tried to address questions about potential exposure linked to Mr. Jackson's remaining legal problems.

Prescient Capital, a New Jersey company that said it helped Mr. Jackson secure the original financing from Fortress, has sued him for breach of contract, accusing him of failing to pay millions of dollars in fees for providing financial advice.

As a result, Mr. Jackson has finally been forced to loosen his grip on one of the richest of song catalogs.

He paid $47.5 million in 1985 to acquire the ATV catalog, which had roughly 4,000 songs — among them more than 200 tunes written by members of the Beatles. After 10 months of negotiations with ATV's owner, the Australian tycoon Robert Holmes à Court, Mr. Jackson bested other suitors including the music executives Charles Koppelman and Martin Bandier, the London-based Virgin Records and the real estate entrepreneur Samuel J. Lefrak.

In 1995, as he confronted early financial woes, Mr. Jackson struck a deal to merge ATV with Sony's publishing arm. The arrangement also provided Mr. Jackson with a stake in new songs acquired by the venture, like "No Such Thing" by John Mayer.

Aside from the Beatles songs, the venture has a vast archive including "Blowin' in the Wind" by Bob Dylan, "Sweet Caroline" by Neil Diamond and "E-Pro" by Beck

The catalog also includes the works of songwriters including Stevie Nicks, Sarah McLachlan, Destiny's Child, Garth Brooks and Richie Sambora of Bon Jovi. The venture is also a big force in country music, having acquired the catalog of Roy Acuff and Fred Rose for $157 million in 2002. An archive of songs from the likes of Hank Williams and Roy Orbison is also included.

HONG KONG (AFX) - Michael Jackson, the debt-laden pop star, may be forced to sell half of his 50 pct stake in a lucrative music-publishing catalog to Sony Corp, under the terms of a proposed 325 mln usd debt refinancing package, the Wall street Journal reported.

In its online edition, the newspaper said Jackson is expected to announce that he has refinanced loan agreements originally valued at a total of about 270 mln usd with the New York hedge fund, Fortress Investment Group LLC.

Citing people familiar with the matter, the newspaper said that as part of his new deal, the singer will probably be forced to sell half of his 50 pct stake in Sony/ATV Music Publishing LLC, which owns and administers copyrights to thousands of songs, to partner Sony sometime in the next year.

Jackson is expected to use the proceeds to pay back a significant amount of his debt to Fortress.

The deal has not yet been signed, the newspaper said. But if finalized, it would be a coup for Sony, which has long been keen to own the Sony/ATV outright.

Mr Jackson bought the catalog, including 251 Beatles songs, 21 years ago at a price far below its current one bln usd valuation.

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Beatles SongsMay Help Pay Pop Star's Debts - Wall Street Journal

Michael Jackson, the debt-laden pop star, could begin to lose his grip on his most prized asset -- his stake in the lucrative music-publishing catalog that includes 251 Beatles songs -- under the terms of a proposed $325 million debt refinancing, according to people familiar with the matter.

The performer, whose star has fallen in recent years, is expected to announce as early as today that he has refinanced loan agreements originally valued at a total of about $270 million with the New York hedge fund, Fortress Investment Group LLC, people familiar with the matter say. As part of his new deal, the singer will probably be forced to sell half of his 50% stake in Sony/ATV Music Publishing LLC, which owns and administers copyrights to thousands of songs, to partner Sony Corp. sometime within the next year. Mr. Jackson is expected to use the proceeds to pay back a significant chunk of his debt to Fortress.

The deal, which wasn't signed as of yesterday, could still fall apart, these people say. But if finalized, it would be a coup for Sony, where music executives have long hoped to buy out Mr. Jackson's interests in Sony/ATV and own the catalog outright. Mr. Jackson bought the catalog, including the big swath of Beatles tunes, 21 years ago at a price far below its current $1 billion valuation. To this day, it generates revenue for Sony/ATV every time one of its songs is played on the radio.

Mr. Jackson, who was acquitted last year of child-molestation charges and has been living in recent months in Bahrain, couldn't be reached to comment. The entertainer's Los Angeles financial adviser, Gaynell Lenoir, described the pending deal as a positive development for the singer. "He's seriously looking at his business affairs, and we're proud of him, really," she said in an interview. "He is vibrant, [and] he is going to resume his career."

The proposed new deal, coming nearly a year after Mr. Jackson's trial, during which friends and fans feared for his emotional and financial well-being, may indicate a new chapter in the entertainer's business affairs....