Hands in £12m dividend from Terra Firma

PRIVATE equity tycoon Guy Hands has taken a £12m dividend from his Terra Firma investment vehicle despite a fall in operating profits.

The payment is the first significant dividend payment by the company since its inception nine years ago, with all previous payouts under £25,000 a year.

However, Hands takes his £12m, released from cash built up in Terra Firma, at a time when revenues at the firm fell from £47.8m to £32.7m in the year to March 2010.

After-tax profits for the company totalled £2.3m, according to accounts, up from £1.9m a year earlier.

Challenging circumstances at the company also led to 20 staff being cut.

A source close to Hands yesterday denied reports suggesting he might be looking to relinquish his holding in EMI ahead of a mid-June deadline to meet banking covenants with lender Citigroup.

The investment bank, which financed the Terra Firma buyout of EMI in 2007, is owed £3bn. Terra Firma would have to inject more equity to avoid a covenant breach, although it is not expected to do so.

Two months ago Hands lost a court case in New York against Citi in which he claimed the bank had misled him into paying over the odds for EMI.

He said the bank had told him a rival bidder was preparing an offer for the music group.

Should Terra Firma fail to meet its banking covenants the bank could take control of EMI and sell the one-time record label behind the Beatles.

Bidders for the music producer behind acts including Katy Perry and Coldplay could include rival record label Warner Music or US private equity group KKR. A spokesperson for Terra Firma last night declined to comment.