Moody's downgrades EMI

Moody's Investors Service said it downgraded EMI Group plc's senior debt and guaranteed debt ratings to Ba2 from Ba1 and assigned a Ba2 corporate family rating to the company.

The outlook is stable.

The downgrade is based on Moody's expectation that EMI's debt protection measurements will not improve over the near term to a level commensurate with the Ba1 rating category. Despite a visible improvement in operating performance during the 2005/2006 financial year, EMI's cash flow remained negative, as it has been in four out of the last five years. While Moody's believes that EMI's second half release schedule will help to compensate for a weak first half performance (reported revenues: negative 5%) during the company's 2006/2007 financial year, it will be challenging for EMI to show meaningfully improved revenue and profits for the year against the backdrop of a still struggling global market for recorded music, the agency predicted.

The Ba2 rating continues to recognize EMI's position as a global player in the "oligopolistic" recorded music industry and the company's leading world-wide position in music publishing with a more stable revenue base compared to recorded music, the agency said.

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