Hands’ EMI payout capped

Steve Dinneen
Follow Steve
TERRA Firma boss Guy Hands will only receive a quarter of the compensation he is seeking from Citigroup if his legal action is successful.

A New York Judge has ruled Hands can receive no more than $2bn (£1.25bn) in his case against the bank, which he says misled him into overpaying for his ill-fated EMI takeover.

Judge Jed Rakoff decided that it would be unfair to use a lost profit model for working out potential compensation. A fair market value theory now seems the most likely outcome, which could potentially cost Citigroup around $2bn.

Last week Citigroup banker David Wormsley denied telling Hands that rival Cerberus Capital Management would bid 262p a share for EMI, forcing Hands into a snap decision.

However, the banker said he did not remember the specifics of any of the key calls between the two former friends that lie at the heart of the trial.

If Terra Firma loses the case it could be forced to hand over EMI to Citigroup, which provided £2.6bn in loans for the acquisition.

The bank’s reputation for facilitating such deals could suffer if the jury decided that Hands had been defrauded.

Terra Firma paid £4bn for EMI. The label, known for star musicians such as Nat King Cole, The Beatles, Pink Floyd and scores of others, is struggling under the weight of its debt.

Earlier this year Hands was forced to go cap in hand to investors in order to make a key repayment.