Citigroup May Settle On EMI Compromise

U.S. banker Citigroup has asked Guy Hands to make an offer to buy EMI if he wants to keep hold of the company, according to the UK’s Daily Mail.

Hands, whose private investment vehicle Terra Firma bought EMI for £4.2 billion in 2007 and is struggling to repay the £2.6 billion it borrowed from Citi to fund the deal, was reportedly invited to pay about £1.6 billion or see EMI broken up.

Terra Firma won’t technically breach its bank covenants until early summer, but reports from both sides of the Atlantic suggests Citi is already talking to firms such as U.S. private equity group KKR, Warner Music, BMG Rights Management and Universal about what it will do if it needs to seize control of EMI.

There seems little Hands can do to prevent that happening, even if – as the Daily Telegraph reported – he’s seeking to appeal the outcome of Terra Firma’s failed lawsuit against Citigroup.

The private equity firm lost its Manhattan Court case against Citi in November, when the jury ruled the bank hadn’t tricked it into overpaying for EMI.

Regardless of whether the appeal goes ahead, paying £1.6 billion to hang on to the company still appears a better financial option for Hands.

After the case, some UK business analysts said his best – and maybe only – hope of holding on to EMI was a debt-for-equity deal with Citi, which has already written off the £3.2 billion it’s owed by Terra Firma.

By doing a deal with Hands, it would at least get half of it back rather than have the cost and bother of breaking up EMI and selling the pieces.