BUSINESS > Jackson's Beatles Catalog Is Becoming So Yesterday

LATIMES.COM: Michael Jackson, who ruled the pop charts before struggling with mounting debts and legal troubles, began dismantling his empire Thursday by agreeing to sell a portion of his beloved music publishing catalog that features hits by the Beatles and dozens of other stars.

To avoid foreclosure on several loans, Jackson signed a $325 million refinancing agreement that will require him to sell half of his 50 percent stake in Sony/ATV Music Publishing to partner Sony Corp. within the next few years. Proceeds will pay off a large portion of the performer's debt, owed primarily to New York hedge fund Fortress Investment Group, LLC.

The deal is a coup for Sony, which has long hoped to acquire a larger interest in the thousands of copyrights owned by Sony/ATV, which include 251 Beatles songs and Bob Dylan's "Blowin' in the Wind." People familiar with the deal, who asked not to be named, said Sony is likely to pay Jackson about $250 million.

The Sony/ATV catalog is currently valued at about $1 billion but is expected to be worth more by the time Sony buys half of Jackson's stake, since revenues have grown by more than 10 percent in the past 2 years. Both representatives for Jackson and Sony/ATV declined to comment on the deal.

A star since he was a child performing with his brothers in The Jackson 5, the singer's 1983 solo album "Thriller" remains one of the top sellers of all time. In 1990, Forbes estimated the self-proclaimed "King of Pop's" net worth at $175 million.

But as his celebrity grew, so did Jackson's overhead, as his lifestyle became more extravagant and his collections of lavish homes and exotic animals grew. At the same time, Jackson's music sales slowed as his public persona was hurtby a civil suit that alleged he had molested a child.

That suit was settled out of court. But in 2004, he was indicted on criminal child molestation charges involving another plaintiff. He was acquittal of those charges last year. . The seeds of Thursday's agreement took root in the spring of 2005, when Bank of America representatives approached Jackson about a looming repayment deadline on a $270 million loan collateralized by the singer's interest in Sony/ATV.

Jackson, who was then awaiting trial on child-molestation charges, authorized his advisers to negotiate a solution that would have erased his debts and provided the singer with income of about $10 million a year, according to someone who participated in the negotiations. As part of the agreement, Sony Corp. would have purchased half the singer's interest in Sony/ATV for between $200 million and $250 million.

But at the last minute, sources close to that negotiations say, Jackson balked at the deal. Over the objections of Jackson's advisers, Bank of America then sold the loans to Fortress.

Jackson was acquitted of all criminal charges last June, but when the newly Fortress-owned loans came due in December, the singer lacked sufficient funds to repay them. Sony officials including chief financial officer Rob Wiesenthal, worried that Fortress might seize Jackson's interest in Sony/ATV, helped the singer negotiate an extension, but the loan's interest rate increased and the total amount owed ballooned to more than $300 million.Jackson soon relocated to Bahrain, making the possibility that he could jumpstart his recording and touring career even more remote .

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 attorney 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, has already pocketed as much as $20 million when Jackson bought out his share as part of Thursday's refinancing agreement.

Citing a confidentiality agreement, Branca refused to discuss Jackson's refinancing or the terms of his agreement with singer.

When Jackson first purchased the copyrights that today spared him from defaulting on his debts, few imagined he would ever need saving.

In 1983, after releasing the bestselling album "Thriller," Jackson met with Branca in the den of his family's home in Encino. The singer told the lawyer that he wanted to start acquiring the copyrights of famous songs.

Jackson had recently dined with Sir Paul McCartney, who had explained that copyright owners typically get half of the revenues generated by a song. A few months later, Branca told Jackson that a company owning the copyrights on 251 Beatles tunes including "Yesterday" and "Let It Be" was on the market, and the singer jumped.

That company, an entertainment conglomerate named ATV, had purchased the Beatles' publishing company in 1969 as well as more than 4,000 songs by other artists.

Jackson told his advisers he wanted ATV as much for emotional as financial reasons.

"Michael was very determined to buy the songs," said Gary Stiffleman, a music attorney who helped negotiate Jackson's purchase of ATV. "He feels a real connection to the masterpieces, and he wanted to own the legacy. They hold enormous emotional value."