Iconic recording company EMI has been taken over by Citigroup, the US bank that provided £3.4bn of debt to the company.
Citi has taken control of EMI despite it keeping up with debt repayments, after concluding that the outstanding sum was unsustainably large.
EMI, home of artists such as Robbie Williams and Kylie Minogue, was loaded with £2.6bn of debt in Terra Firma’s £4.2bn buyout deal in 2007, but has now had most of the loans lifted by Citi.
Citi had refused to renegotiate the terms of the debt before taking ownership.
Terra Firma's buyout epitomised the risks of loading companies with debt when EMI’s performance slumped in the downturn.
The battle for EMI was soured by an acrimonious US court case brought by Hands in December, in which he accused Citi investment banker David Wormsley of tricking him into paying far more for the company than it was worth.
US judges found in favour of Citi but Hands lodged an appeal last month.
Citi has cut EMI’s debt by 65 per cent to £1.2bn and it has been left with more than £300m cash.
EMI's management welcomed the change.
"The recapitalisation of EMI by Citi is an extremely positive step for the company," EMI chief executive Roger Faxon said in a statement.
"It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity. With that solid footing, we are confident in our ability to drive our business forward."
In a statement, Terra Firma said it was “pleased that EMI’s debt burden has been reduced through Citi agreeing to write down a substantial proportion of EMI’s debt.”
EMI said it would continue under the same management and it is now completely separate from its previous owner. The vehicle formed by Terra Firma to own EMI, called Maltby, is now in administration.