S&P puts EMI on watch

Standard & Poor's put EMI Group plc on CreditWatch negative including its £325 million 8.25% bonds due 2008 and £800 million multi-currency revolving bank loan due 2005 at BBB-.

S&P said the action follows confirmation from EMI that it has entered nonexclusive discussions with AOL Time Warner Inc. (BBB+/Watch Neg) concerning a possible acquisition of the Warner Music Group's recorded-music division.

S&P said the watch placement reflects its uncertainty over the capital structure of any potential transaction between EMI and AOL Time Warner.

Few details are available because the discussions are described by EMI as being at a very preliminary stage and, furthermore, any proposed deal would require approval from EMI's shareholders as well as regulatory authorities, S&P noted.

EMI and Warner Music have roughly similar global market shares. Whereas EMI has a stronger share in Europe, Warner has a stronger representation in the large North American market. Together, EMI and Warner could have a similar global share as Universal Music Group, a division of Vivendi Universal SA, S&P added. If achieved, the combination of EMI's and Warner's recorded music businesses could offer marketing benefits and scope for rationalization in the face of the highly challenging music market.

S&P will likely raise AirTran outlook after stock offering

Standard & Poor's said it will likely raise its outlook on AirTran Holdings Inc. to positive from stable on completion of its planned sale of 8.7 million shares of common stock plus 1.3 million share greenshoe. Proceeds could amount to over $150 million, S&P noted. S&P rates AirTran's corporate credit at B-.

AirTran said it will redeem $35 million of senior secured notes with a portion of the proceeds of the stock sale.

If the stock offering is successful, AirTran's liquidity and balance sheet would improve, S&P noted.

The proposed share offering would more than double the company's equity base, but a substantial and increasing lease burden, as AirTran continues to take delivery of new aircraft, will constrain improvement in its financial profile, S&P added.

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