New York – As Michael Jackson digs himself out of a financial hole, Sony is getting something it has long wanted: the opportunity to take control of the lucrative music publishing catalog that it owns with the pop singer.
The 50-50 joint venture – Sony/ATV Music Publishing – owns rights to more than 250 Beatles songs, as well as many other artists’ work.
Estimates of its worth range up to $1 billion.
A statement from Jackson representatives Thursday announced that he “has restructured his finances with the assistance of Sony Corp. of America” and has “concluded refinancing with affiliates of Fortress Investment Group,” his major creditor.
Fortress bought Jackson’s $270 million in loans from Bank of America last year.
On the advice of Bahraini advisers and new Los Angeles- based consultants, Jackson negotiated Thursday’s deal, in which the singer may receive less from Sony than was proposed last year.
Jackson, who according to 2005 court testimony was spending $30 million more a year than he earned, will still collect profits from his remaining 25 percent share in Sony/ATV and will receive royalties from his own compositions, which remain separate from Sony/ATV.
However, the publishing rights of those songs will be used as collateral for the refinanced loan, putting them at risk if Jackson defaults in the future.
“There’s no more people in the shadows to help him out,” said Debra Opri, an attorney who represents Jackson’s parents. “He’s selling everything because no one else will finance him.”
Another beneficiary of the agreement is Los Angeles music lawyer John Branca, who has been alternately embraced and spurned by the mercurial Jackson throughout much of the singer’s career. Branca helped structure the entertainer’s purchase of the Beatles’ and others’ copyrights in 1985 for $47.5 million.
Today, those assets are worth more than five times that, and sources say Branca, who owned 2.5 percent of the Sony/ATV venture, pocketed as much as $20 million when Jackson bought out his share as part of Thursday’s refinancing agreement.
In the restructuring, Sony acquired the option to buy as much as half of Jackson’s stake in Sony/ATV, according to an executive briefed on the deal who requested anonymity because none of the parties wants to disclose terms. Two people familiar with the matter, however, said the deal also calls for Fortress to lower Jackson’s interest rates.
Fortress did not return phone calls. Jackson adviser Gaynell Lenoir declined to comment. Sony also declined to comment.
Sony had good reason to help Jackson: If his financial troubles worsened, he could have been forced to auction his Sony/ATV stake. Sony could have found itself yoked to a partner it didn’t want.
The song catalog has been seen as a financial safety net for Jackson as his debts increased.
In addition to collecting millions in royalty income, Jackson used it in 2000, along with his Mijac publishing company that holds the rights to his songs and his Neverland Valley Ranch, as collateral for the Bank of America loans.
Testimony during Jackson’s trial last year on child-molestation charges – he was acquitted on all counts – alleged he was under serious financial stress.
Duross O’Bryan, a forensic accounting expert and witness for the prosecution, said the pop star was in a “serious cash crisis.”
In a more recent public indication that he might be under strain, the California Department of Industrial Relations threatened him with legal action if he didn’t pay $304,000 in back wages to Neverland staff. Jackson’s representatives paid those employees last month and paid a $49,000 penalty.
In 1985, Jackson made a shrewd investment when he paid $47.5 million for ATV, which owns 251 Beatles songs. In 1995, he merged ATV into the joint venture with Sony Music Publishing. In addition to the Beatles, Sony/ATV owns or administers rights to songs by artists such as Bob Dylan, Brooks & Dunn and Jimi Hendrix.
Music publishing is a lucrative income generator, with rights holders getting a royalty each time a song is performed or recorded.
The Los Angeles Times contributed to this report.
