The End Of EMI?

The future of EMI has been thrown into doubt after a New York jury decided U.S. banker Citigroup didn’t mislead Terra Firma into paying too much for one of the world’s most revered record companies.

Guy Hands, head of London-based private equity company Terra Firma, sued Citi because he claimed it had duped him into overpaying for EMI.

He wanted a multimillion–dollar settlement from Citi, which lent his company most of the money it needed to buy EMI, because it misled into believing he was being outbid by a competitor.

The eight-person jury at Manhattan District Court Nov. 4 spent four hours deliberating before deciding there was no hard evidence to show Hands and Terra Firma had been cheated.

Hands had claimed that his private equity company was tricked, while Citigroup claimed Terra Firma started the legal spat only to reduce the £2.5 billion debt it still owes Citi. The bank’s lawyers said Terra Firma’s action was born out of “buyer’s remorse.”

The private equity company’s backers have tipped in millions of pounds to keep it within its loan covenants with its banker, but the New York court verdict means it will be much harder to convince them to pour in even more money in the future.

If Terra Firma fails to pump in enough “equity cure” to keep Citigroup happy, it may not be long before the bank forecloses.