Sanctuary unveils £110m rescue deal

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The Independent Online

Sanctuary, the world's biggest independent music label and home to stars including Sir Elton John, announced a rescue deal yesterday designed to save it from losses stemming from a disastrous acquisition.

The company said its Urban Records, bought from Mathew Knowles, the father of the R&B singer Beyoncé, would release no more records after contribut-ing to a group loss for the year of £143m, more than five times bigger than in the previous year.

Sanctuary said it had received "indications" of support for an equity fundraising of £110m from institutional investors. It warned the deal would be at a "substantial" discount to the company's already bombed-out share price. Sanctuary shares plunged 26 per cent to close at 0.78p. The stock traded at more than 45p at the start of last year.

Andy Taylor, the executive chairman, said: "The past 12 months have been the most difficult and challenging period that Sanctuary has ever had. We have had to make fundamental changes and difficult decisions, but it was essential to make them and we acted quickly to do so."

Sanctuary cut jobs and non-core businesses in 2005 amid profits warnings stemming from troubles at Urban. The company said: "The effect of various announcements during the year and the circumstances referred to were particularly damaging to the company's standing in the industry due to the uncertainty it created over the financial viability of the company."

Analysts at Investec Securities said Sanctuary's future depended largely on how badly its reputation had been hurt. "Will this prove a pyrrhic victory, if the company goes ex-growth?" they asked in a research note.

Sanctuary said last month it was in talks to sell its music publishing and studios businesses. Buyout talks, thought to have been held with EMI and Warner Music, failed in August.