Sanctuary, the struggling music publishing group that is home to Elton John, Beyonce and Morrissey, is facing one-off charges that could reach £170 million as it prepares to pursue a crunch equity fundraising expected to total about £100 million.

The music group, which has already warned on profits and is now expecting to post a pre-tax loss for the full year, said the charges would come in the form of "substantial" provisions and writedowns that would hit this year's annual results.

Although the full figures are still being audited, Sanctuary said the provisions and writedowns were "likely to be in the region of £130 million to £170 million".

It detailed the likely size of the charges as it confirmed that it had hired Evolution Securities to explore a "significant" equity fundraising.

The world's biggest independent music label also said it was in "active discussions" over the sale of its music publishing and studios businesses.

Although Sanctuary did not detail the size of the proposed cash-raising, it is thought to be for about £100 million - with the aim of reducing some of its crippling £120 million debt burden, which cost it about £7 million a year in interest payments.

"The board recognises that the level of debt in the group is too high and is actively exploring a number of options for the medium and long-term financing of the group," Sanctuary said.

Although the company admitted there is "no guarantee that it will succeed in raising further funds", it stressed that it continued to enjoy the support of its bankers.

Shares in the group, which have crashed since the collapse of takeover talks earlier this year, tumbled again this morning. Having initially lost more than a quarter of their value, the shares were trading about 20 per cent lower at 2.6p after a little over an hour's trading.

The shares value Sanctuary, which has cut about a quarter of its staff worldwide in a concerted push to cut costs, at just £10.7 million.

In mid-June, just before Sanctuary disclosed it was in merger talks, the shares were worth about 43p and valued the company at just short of £160 million.

Sanctuary is talking with potential investors in the issue, which is expected virtually to wipe out the equity of its existing shareholders.

Its best-known shareholder is John de Mol, the co-founder of Endemol, the television group behind Big Brother, with a 19.5 per cent stake.

However, the company is looking to bring in new equity investors, rather than agree a debt-for-equity swap with existing creditors.

Sanctuary is thought to be holding separate discussions with HBOS, its biggest lender, which is concerned about being repaid. The bank has called in Ernst & Young to determine whether Sanctuary has the potential to repay its loans.

Although Sanctuary desperately needs extra cash if it is to expand its business, the fundraising is not thought to be a "make-or-break" for the group.

Analysts said that it would not be easy for Sanctuary to raise the money after a difficult year. In October, the company said that it planned to cut a quarter of its workforce, about 175 jobs, in the hope of staying alive after takeover talks fell through.

The company, based in West London, will close offices in North Carolina and Canada, where most of the job cuts will occur. In the summer, Sanctuary said that takeover talks had fallen through, after informal discussions with more than six potential bidders. Leading music groups were touted as possible bidders, along with several private equity groups.

A month later, Sanctuary admitted that it would make a loss this year before interest, tax and one-off charges, conceding that it was paying the price of growing too quickly.

Two weeks ago, a Los Angeles-based record label, 5.1 Label Group, said that it was suing Sanctuary for $50 million (£28.9 million), for alleged breach of contract and fraud. It claims that the owner of the world’s largest independent recorded music catalogue failed to deliver between 140 and 220 albums.

Sanctuary has said previously that 5.1 Label’s action is "totally without merit".

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