While it's unclear whether EMI Music CEO Elio Leoni-Sceti resigned effective March 31 because he jumped or because he was pushed, industry insiders say EMI Music chairman Charles Allen’s expanded executive role has come to the right man at the right time.

EMI Group is at a critical juncture in its financial maneuvering in that the recorded music side of the company is expected to fail its March 31 financial covenant test under the 2.7 billion pounds ($4.2 billion) it owes Citigroup. That violation would place its loan in technical default, unless cured by an equity injection. Terra Firma, which bought EMI for 4 billion pounds in 2007, is already in talks with its investors to inject another 120 million pounds ($187 million) to satisfy its obligations under the loan for the next year.

Allen—who was executive chairman of U.K. TV company Granada from 2001 to 2004 and then chief executive of ITV from 2004 to 2007—is well-known in European banking circles and to European regulatory agencies, say sources familiar with the executive. What’s more, he is expected to play well to Terra Firma investors, those sources say.

Allen, who had been non-executive chairman of EMI Music since January 2009, “is a smart guy who loves the business, is very cordial and very engaging, and loves the creative side of things,” says one executive familiar with Allen. “He doesn’t micro-manage and he picks good executives and lets them do their job.”

More importantly, as the non-executive chairman, Allen has had time to get seasoned on the nuances of the music business before taking on the day-to-day running of EMI Music.

When Leoni-Sceti was brought aboard as CEO of EMI Music in July 2007, the move was seen as a complement to the radical restructuring initiated by Terra Firma chairman Guy Hands. The rationale of bringing in an outsider was touted as a way to help EMI develop a new approach to the record business as it transitions to the digital marketplace.

While that approach may be a good idea in times of prosperity, it doesn’t work so well when you have a “four-bell fire-alarm emergency going on, which is what is occurring to the music industry,” says a former top industry executive.

Leoni-Sceti is a former Procter & Gamble executive who, prior to joining EMI, had been a senior manager with household cleaning products firm Reckitt Benckiser.

Leoni-Sceti wasn’t considered an integral ingredient in generating hits for the company. Nor was he there long enough to establish strong relationships with artists and managers.

“Elio was a first-time CEO who never had run a company before and had no knowledge of the music industry,” says one source familiar with the situation.

Another source familiar with the company says, “A lot of guys who come into the industry from the outside look at the creation of product as the easiest part of the program. These people devise strategies that will reward you enormously when you have hits, but the first thing you need to do is make hits.”

That source continues, Leoni-Sceti is “very intelligent, worked hard and prided himself on his quick decision-making ability, but when you add up his EMI accomplishments, it's not much. Under his leadership, EMI embarked on an extensive consumer research project that is questionable in value.”

But others familiar with EMI defend Leoni-Sceti’s tenure at the EMI helm. “I think it's a bit unfair to say the only thing he did was initiate consumer research. During his time, EMI trebled its profits and signed 200 artists,” says one executive.

Another source says that under Leoni-Sceti’s leadership, there has been “a marked improvement in every metric, top line, profits and market share.”

EMI generated revenue of £1.569 billion ($2.45 billion) in fiscal 2009, up 7.5% from £1.46 billion ($2.28 billion) in the prior year, according to a Maltby Capital financial report released at the end of January for the fiscal year ended March 31, 2009. That report noted that adjusted earnings before interest, taxes, depreciation and amortization surged 79% to £293 million ($458 million) from £164 million ($256 million) in 2008. And an EMI representative says that operating profits have risen substantially in the current fiscal year as well.

While market share may have grown worldwide, that’s not the case in the U.S. Stateside, EMI’s overall album share was 10.8% at the end of 2007, rose slightly to 10.91% at the end of 2008, but fell to 9.0% at the end of 2009, according to Nielsen SoundScan.

But so far this year, EMI has come roaring back with an 11.88% U.S. album market share, thanks to hits by Lady Antebellum, which has the year’s best-selling title in “Need You Now”; Corinne Bailey Rae's "The Sea," which debuted at No. 7 on the Billboard 200; and hits compilation “Now 32.”

The company’s streak continues with the Gorillaz’ “Plastic Beach,” which is expected to debut in the top three slots of the Billboard 200 next week.

Moreover, during Leoni-Sceti’s tenure, the company signed deals with Cypress Hill, Peter Gabriel and Slash, among 200 new signings, and 90% of those deals are for multiple rights, the source says. Moreover, the Disney Music Group just renewed its licensing agreement with EMI for Europe, the Middle East and Africa.

In a statement, EMI said Leoni-Sceti had "successfully led EMI Music through the first phase of its operational turnaround."

Leoni-Sceti added: "EMI is a wonderful business with a great team and new creative and operational momentum. My job here is now done and it is time for me to move on."

An executive familiar with the EMI situation says Leoni-Sceti resigned of his own accord. “He has been completely straitjacketed; he couldn’t make any big decisions because Terra Firma is all over the decisionmaking,” that source says. “EMI Music will fail its covenant, whether Elio is there or not, and then there will either be a cure or a change of control. Whether there is refinancing, a sale or whatever, Charles Allen is better equipped to handle it. Elio, while really intelligent and well-liked, doesn’t have the experience or gravitas to handle this situation.”