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Sanctuary Unveils £110M Rescue Plan

(CelebrityAccess MediaWire) — Britain’s struggling Sanctuary Music Group unveiled plans this week to raise £110 million ($195 million) to ensure its survival, after convincing creditors to basically clear £35 million ($62 million) worth of debt.

The world’s largest independent music label, home to superstars such as Elton John and the young James Blunt, will raise the capital by issuing new shares at a substantial discount from its current price. The move will almost wipe out the value of the remaining shareholders’ interests.

“Shareholders should be aware that the equity fundraising is likely to occur at a substantial discount to the current market price of the ordinary shares,” the company said in a statement, according to The Guardian. “Due to the amount being raised relative to the market capitalisation of the company, existing shareholders will also suffer significant dilution.”

The company has spent a year cutting jobs and non-core business divisions after strong profit warnings, but says it has received “indications of support” for the stock sale from institutional investors.

The survival plan was announced as the company announced losses of £142.8 million ($253 million) for 2005, almost five times the previous year’s loss, with revenue falling 6.3% to £156.1 million ($277 million), according to the paper.

The company blamed delayed album releases for its falling revenue, and increased costs due to acquisitions of companies such as Elton John’s Twenty-first Artists last year.

In December, Sanctuary announced that it was in talks to sell its music publishing and studios businesses and would make write-downs and provisions of more than £130 million ($231 million). In August, it announced the failure of buyout talks, which sources said had been held with EMI, Warner Music Group and several private equity groups.

“Despite the awful year that we have had, we are looking to the future with confidence,” CEO Andy Taylor told The Guardian. “Sanctuary’s underlying business model is a good one.”

Analysts blame the company’s recent problems on overambitious expansion. The company was forced to drop 175 jobs, a quarter of its worldwide workforce, this past October.

At its peak two years ago, the company was valued at more than £200 million ($355 million). –by CelebrityAccess Staff Writers