How ‘The Worm’ Turned
The latest installment of Terra Firma v. Citigroup has revealed how David “the worm” Wormsley turned from helping the private equity firm buy EMI to trying to help the U.S. bank take control.
The Manhattan District court heard how an e-mail he sent in November 2007 indicated the bank intended to make it hard for Guy Hands’ company to repay the debt so that it could take over ownership of EMI. The e-mail was sent barely six months after Terra Firma borrowed heavily from Citigroup to complete the £4.2 billion purchase of the English music group.
Wormsley took the stand Oct. 25 for the first of what’s likely to be three or four days of cross-examination that may be crucial to the outcome of the multibillion-dollar case.
Terra Firma’s suit claims Wormsley, one of the City of London’s most influential dealmakers, lied to Hands in order to sway him into bidding too much for EMI. It says he led Hands to believe that Cerberus Capital was bidding against him, when the U.S. private equity business had already pulled out of the auction.
Wormsley denies this. Corroborative evidence came from Simon Borrows, co-head of investment bank Greenhill, which – like Citigroup – advised EMI on its sale.
Borrows told the court Wormsley had been kept out of the loop when Cerberus dropped out because he was known to be close to Hands, and Greenhill didn’t want the information to leak.
In the previous decade Hands and Wormsley had together worked on 20 deals totaling more than £35 billion.
“In terms of managing bidders, it is useful for them to have as much uncertainty in their minds as possible,” Borrows explained. “It was a need-to-know piece of information and the people who needed to know that were a very small number.”
The case hinges on whether the jury believes Hands’ or Wormsley’s version of the content of three telephone calls they had in the three days leading up to the EMI auction deadline.
“You will have to decide who is telling the truth and who is not telling the truth,” Judge Jed Rakoff told the jury when the case opened Oct. 18.