Sanctuary not on solid ground?

It seems that Elton's new label Sanctuary is not exactly on stable ground right now.

LONDON (Reuters) - Music group Sanctuary (SGP.L: Quote, Profile, Research), home to artists ranging from Axl Rose to Elton John, warned of further deterioration to its trading conditions on Tuesday and said that key buy-out talks had fallen through.

Shares, which stood at 42 pence at the beginning of the summer, continued their slide, falling 35 percent to 11-1/4 pence by 0839 GMT (9:39 a.m. British time) -- their lowest point in more than 13 years.

The company said it has obtained waivers and amendments to its financial covenants, and increased some of its bank facilities to 120 million pounds. It has also obtained waivers and amendments to its outstanding 30 million pounds of convertible loan notes.

"Trading has remained difficult, which, together with the operational constraints placed on the business during this time, seems likely to result in a further deterioration of the results for the full year," the company said in a statement.

Sanctuary said in June that it was in talks with an outside party that could result in a bid for part or all of the company, but it said on Tuesday that those particular discussions were "unlikely to lead to an offer at or near to the current share price".

Sanctuary is the world's biggest independent music label and a major player in artist management, touring and merchandising.

A period of rapid growth saw it buy up several large artist-management companies, but problems at units such as Sanctuary Urban -- headed by Mathew Knowles, father and manager of singer Beyonce -- have hit a sour note in recent months, including a profit warning in June.

Sanctuary said that discussions are continuing with several other parties which could lead to "a range of possible transactions including a possible offer for the company".

The company has held talks with EMI (EMI.L: Quote, Profile, Research), Warner Music Group (WMG.N: Quote, Profile, Research) and several private-equity and venture-capital groups about a potential investment, asset sale or buy-out, according to sources familiar with the situation.

"While we are relieved that Sanctuary has renegotiated some its covenants, we believe the situation remains highly risky until Sanctuary provides some evidence of being able to pay down debt, perhaps through a disposal of some of its music catalogue," the media team at Numis Securities said in a research note.