Guy Hands' Terra Firma Capital Partners plans to ask investors to put a further £360 million ($555 million) into EMI - three times the amount Terra Firma previously indicated would be needed to make up shortfalls against the loan covenants.
According to the Financial Times, that sum will see the EMI loans through to 2015, when they come up for renegotiation, and avoid the risk of Terra Firma losing control of the major to Citigroup, which holds EMI's £3.2 billion ($4.9 billion) debt.
EMI investment vehicle Maltby Capital had previously suggested an equity cure of £120 million ($185 million) to pass the Citigroup covenant test by June, alongside a new business strategy drawn up by EMI management. Chief executive Elio Leoni-Sceti left the company during that process last month and Charles Allen became executive chairman.
The FT said the larger sum would cover any potential future breaches and a shortfall on the EMI pension scheme, which auditor KPMG had said could range from £10 million ($15.4 million) to £200 million ($308.4 million).
The equity cure is required for the recorded music division of EMI, not the publishing side of the business.
EMI is worth £2 billion ($3.1 billion) less than the £4.2 billion ($6.5 billion) Terra Firma paid for the music group in 2007, according to the court documents filed by Citigroup as part of its lawsuit with Terra Firma. EMI Music Publishing was valued at £1.46 billion ($2.25 billion) and EMI Music at less than £800 million ($1.23 billion).
But Hands - currently stuck in New York because of the shutdown on U.K. flights resulting from volcanic ash clouds - is making a bold proposal to investors, which would see them gambling on a long-term revival of EMI and the music sector in general from digital music sales.
Investors might ask why the latest strategy plan for the recorded music division was not done in the first place. Maltby Capital chairman Lord Birt said the company needed to move away from the CD business and into digital music more quickly back in October 2008.
Hands will also tell investors that he and his colleagues intend to put a further £58 million ($89.4 million) into EMI themselves, £36 million ($55.5 million) above their pro rata allocation, according to Bloomberg.
The Terra Firma investment plan is dependent on the new EMI Music business strategy. Allen's plan is expected to include more job cuts - the Times reported it as in the hundreds - possible asset sales and further attempts at outsourcing.
"EMI is preparing a detailed business plan that outlines a long-term strategy for the group," said an EMI spokesperson. "The project is intended to strengthen the company by securing additional investment for future growth and creating stability for our current and future artists. EMI intends to complete the project by mid-June."
Extra funds could enable EMI Music Publishing to be more aggressive and make acquisitions. However, the activity of new operations such as BMG Rights Management and Imagem Music in buying up music publishing companies suggests there will be no cheap deals available to EMI.
A spokesperson for Terra Firma declined to comment.