Hands to fight to retain EMI

Marion Dakers
GUY Hands’ private equity group Terra Firma will fight to keep hold of beleaguered music label EMI, a source close to the company said yesterday.

British tycoon Hands lost a $2bn (£1.25bn) fraud case against his bank Citigroup linked to his £4.2bn purchase of EMI last week, and reports at the weekend suggested he might dispose of the debt-riddled company.

However, a source told City A.M. that Hands was not ready to cut his losses. “Terra Firma has got no intention to sell the company,” a person close to the company said yesterday. “It would make no economic sense to do so.”

EMI is saddled with a £3bn debt pile, the bulk of which is provided by Citigroup.

Despite having a roster of international stars such as Coldplay and Kylie Minogue, the music label has been hard hit by the defection of major acts such as Paul McCartney.

The bank could seize control of the firm if it breaches banking covenants, a scenario that has been prevented in the past by Hands pouring his own money into the group.

Citi could insist on a debt-for-equity swap for a majority stake in the firm if Hands cannot meet repayments.

Terra Firma, which has reserved its right to appeal against the New York court’s ruling last week, has until March next year to meet the next round of debt deadlines.

Hands has said he will fight for better terms on the debt pile, though he has already asked Citi for more generous repayment conditions without success.

He remarked in court: “If you accuse someone of fraud, it’s really game over. In terms of refinancing negotiations it’s like putting a stick into a dragon.”

If Citi does take over the music label, rival firms including Warner Music Group and BMG are waiting in the wings to bid, according to several reports yesterday.

Spokespeople for Warner Music Group, Citigroup and Terra Firma declined to comment yesterday. BMG was unavailable for comment.