US bank lines up buyers for troubled EMI

A US bank is lining up potential buyers for EMI in a bid to put pressure on the indebted music firm’s owners to sell the company, it was reported today.

Citigroup, which is owed £2.6bn (€2.9bn) by EMI’s owners, is understood to have approached private equity firms in the US and Sweden, as well as US music company Warner Music over purchasing the group, according to the Observer.

It is the latest twist in increasingly bitter wranglings between Citigroup and Guy Hand’s private equity group Terra Firma, which owns EMI.

Terra Firma bought EMI, whose artists include Robbie Williams and Norah Jones, in 2007 for £4bn (€4.51bn), £2.6bn of which was supplied by Citigroup.

But the private equity firm is now suing Citigroup through the US courts over its role in the sale, claiming Citigroup falsely said there were other bidders for the record company, when they had pulled out.

It is seeking unspecified damages, while it also wants Citigroup to write off some of its debt.

The latest move by Citigroup to find potential buyers for the business is thought to have been triggered by concerns that Terra Firma could breach its debt covenants at the end of this month.

If this happens it would lead to a forced takeover of EMI by Citigroup, which would then run the music business itself, something it is understood to be reluctant to do.

Terra Firma has to pass a quarterly test to ensure EMI’s profit-to-debt ratio continues to meet the terms of the loan agreement.

However, the group can inject equity to make up the difference, something it is reported to have done four times in the past 18 months.

Meanwhile, it was reported that Terra Firma is set to inject millions of pounds into EMI to avoid breaching its covenants and losing control of the business to Citigroup, according to the Sunday Telegraph.

Mr Hands is also understood to have offered to inject £1bn (€1.12bn) of equity into EMI if Citigroup agrees to write off a similar sum of its debt.

He is reported to have approached City pension funds, insurance companies and foreign banks to step in and help prop up the debt-laden firm.

Terra Firma led a boardroom clear out when it took over EMI and axed a third of the group’s workforce as part of a pledge to save £200m (€220m) a year.

Its swingeing cost cutting and ruthless private equity approach is thought to have sparked a near-revolt among artists amid reports Terra Firma had launched a clampdown on excessive business lunches and told artists to work harder.