THE troubled EMI music group is examining a radical plan to borrow £1 billion against its prized publishing business, which manages the rights to more than 1m songs.

John Gildersleeve, the chairman, and Eric Nicoli, the chief executive, are urgently looking at ways to “reengineer the balance sheet” after last Wednesday’s shock profit warning — its second this year. This followed a further collapse in US sales.

EMI Music Publishing — publishers for six of last week’s Brits award winners, including Amy Winehouse and the Arctic Monkeys — is a profitable business largely sheltered from the digital whirlwind ripping through the recording division.

The plan, which is under discussion by the board, is to borrow £1 billion secured against publishing revenues. The proceeds would be used to repay more expensive debt and potentially save £20m a year.

An EMI spokeswoman said: “Of course we regularly review our financing options, but no new decisions have been made at this time.”

The proposal is likely to be welcomed by Eclectica, the London-based hedge fund headed by Hugh Hendry that has built a 0.75% stake in EMI.

It is to contact the board this week to demand that investment bankers be appointed to assess the value of the music-publishing business.

Hendry said he was willing to join the board, and to show commitment he was prepared personally to match the board’s combined shareholding.

He said: “I want to propose a greater level of disclosure in keeping with industry standards so we can have a proper and more informed discussion about the valuation of the publishing business.”

He added: “We’re in favour of bringing in private equity but retaining a float because the collective body of shareholders believes the stock is undervalued. I’m happy to go on to the board so we have proper shareholder representation.”

EMI’s net debts are set to rise to about £1.25 billion because of restructuring and redundancies, and the £93m cost of buying out minority interests in Japan.

Even before the latest problems, Standard & Poor’s, the credit-rating agency, had cut its rating of EMI’s debt to BB minus and put it under review “with negative implications”.

Guenter Steinitz, of Company Watch, another financial analysis firm, said: “At the interims they had made negligible profits. They have negative net worth and are funded by bonds on which they have to pay interest, and £1.2 billion of current liabilities. I searched hard for any redeeming features. The only thing of value is the brand names.”