Michael Jackson Advisors Try to Stave Off Default

Advisors to Michael Jackson spent Tuesday negotiating to keep the once self-proclaimed “king of pop” from defaulting on $200 million in loans guaranteed by the singer’s stake in the Beatles’ song catalog.

People familiar with the negotiations expected Jackson’s representatives to secure a six-month extension to repay Fortress Investment Group, which owns loans that came due Tuesday. Fortress purchased the debt from Bank of America Corp. in April.

The loans are collateralized by Jackson’s 50% partnership in Sony/ATV Music Publishing, a joint venture between the singer and the electronics company that owns a 4,000-song catalog containing such songs as Bob Dylan’s “Blowin’ in the Wind” and 251 Beatles hits.

Jackson’s share in Sony/ATV, which also owns his valuable catalog and Neverland ranch in the Santa Ynez Valley, is worth more than $500 million, according to court testimony.

According to sources, Fortress will demand interim payments during the extension, and may insist on an interest rate that could reach as high as 9.5%, or more than $1.5 million a month. Fortress also owns another Jackson loan, for $70 million, that has not come due. The sources requested anonymity because negotiations were still going on.

A spokeswoman for Fortress declined to comment on the negotiations. A spokeswoman for Sony/ATV declined to discuss specifics, except to say that the firm was “trying to be a good partner, and keep the partnership with Jackson going.” Jackson’s lawyers and spokeswoman did not return phone calls.

If Jackson does default on his loans, he may be forced to sell a portion of his half-ownership in Sony/ATV. Such a transaction, however, could take months to complete and might result in a tax bill of $40 million, according to court testimony from earlier this year.

Jackson was acquitted of charges of child molestation in June in Santa Maria, Calif. During that trial, court testimony revealed that the singer was strapped for cash, spending as much as $30 million more a year than he earned. During the last year Jackson was sued at least four times, accused of failing to pay $3.3 million in overdue bills.

Jackson is living in the Middle Eastern nation of Bahrain, and it is unclear whether he is personally involved in his finances. Once represented by established career builders such as Sandy Gallin and Jeff Kwatinetz, Jackson has in recent years had an ever-changing circle of advisors, many with little experience in finance or the music business. Often, the singer’s decision-making is based on “who has Michael’s ear at the moment,” as one longtime confidant put it in June.

Jackson’s financial troubles have worsened as his popularity has declined. Jackson’s 1982 album, “Thriller,” is No. 2 on the list of best-selling albums in U.S. history, shipping 26 million copies since its release, according to the Recording Industry Assn. of America.

But Jackson’s last album of new material, 2001’s “Invincible,” sold only 2.1 million copies, according to Nielsen SoundScan. Since 2003, domestic sales of Jackson’s albums have declined to about 1 million a year.