EMI owner agrees funding injection

The owner of music group EMI today pledged to inject more money into the business in order to prevent US bank Citigroup from taking control.

Financier Guy Hands’ private equity fund Terra Firma has secured sufficient support from investors for the fundraising, which reportedly involves a sum of around €123m.

Mr Hands had until today to give Citigroup a compliance certificate showing that EMI can avoid breaching the terms of its €3.7bn loans for another year. Failure to have done so would have seen its recorded music arm default on its debt, allowing Citigroup to take control or sell it on to a rival.

EMI, whose acts include Gorillaz and Coldplay, said the funding commitment represented a vote of confidence in EMI’s turnaround plans and recent operating performance.

It has informed Citigroup about the fundraising and said it expected the process to be completed by a deadline of June 14.

The €123m being raised is well short of the €421m Mr Hands originally wanted to tide the group over until 2015, and he will still have to go back to investors to ask for an additional €298m later in the year, or secure the additional funding from other sources.

Terra Firma bought EMI for €4.9bn in 2007 on the eve of the credit crunch, borrowing €3.7bn from Citigroup to fund the deal.

But the music group has seen its finances strained by difficult trading conditions, and posted a €2bn loss for the year to March 2009 in accounts released earlier this year, after suffering more than €1.28bn in one-off write-downs and restructuring charges.

Terra Firma is currently engaged in legal action against Citigroup, claiming the bank “misrepresented fundamental facts” over the sale of EMI.

It alleges Citigroup falsely said there were other bidders for the record company, causing it to raise its bid. Citigroup denies the allegations.

Former ITV boss Charles Allen was recently appointed as executive chairman of EMI Music. He said today: “We are very pleased to have received this confirmation of an additional investment, which is a vote of confidence in EMI from Terra Firma and its investors, following the significant improvement in the company’s operating performance.