Citigroup grabs control of EMI from Hands

Citigroup snatched control of EMI from the private equity mogul Guy Hands yesterday, after the historic record label's management declared it could not go on under the burden of billions of pounds of crippling debt.

Mr Hands, who believed he had until the summer to resolve EMI's financial difficulties, was frozen out of restructuring talks between management and Citigroup, which involved putting EMI's parent company into administration yesterday afternoon. The bank argued that the record company was in effect insolvent, giving it a legal basis to act sooner.

EMI, the home to Coldplay and Katy Perry, owed Citigroup £3.4bn, following a debt-funded buyout by Mr Hands' investment company Terra Firma at the peak of the credit bubble in 2007. Since then it has failed to generate the profits needed to pay off its creditors.

Even Mr Hands had admitted the company was doomed to breach its promises to lenders this March. In previous years, Terra Firma had scraped together enough additional funds to inject into the company to keep EMI from breaching covenants.

The change of ownership frees EMI to solicit buyers or merger partners, as the record industry continues to search for ways to improve its fortunes in the face of falling CD sales and rampant digital music piracy.

It also marks the final unravelling of one of the most ill-starred private equity acquisitions of the boom era, and a humiliation for Mr Hands, one of the UK's most famous financiers, who has lost about £1.75bn on the deal. From day one, his ownership of EMI ran into trouble, as he attacked artists for expecting too much money and not working hard enough and artists attacked him for sacking thousands of employees and slashing costs.

Mr Hands made no immediate public comment on Citigroup's strike last night, but in a terse statement a Terra Firma spokesman said the company was "pleased that EMI's debt burden has been reduced through Citigroup agreeing to write down a substantial proportion of EMI's debt".

In November, Mr Hands had taken the bank to court in the US, claiming Terra Firma was misled into overpaying for EMI in 2007. A Manhattan jury took just four hours to dismiss the case.

Last week, Terra Firma said it would appeal the ruling, but while a reversal could win Mr Hands some compensation and help him rebuild his reputation, it is unlikely to affect the ownership of EMI.

By demanding immediate repayment of its loans to EMI's parent company, Maltby Investments, Citigroup hastened the change of control. Maltby, whose directors include EMI's chief executive Roger Faxon, appointed administrators yesterday and ownership of EMI was immediately transferred to Citigroup.

The bank has already written off most of the value of its loans and, under the terms of the restructuring, EMI will now have a debt load of £1.2bn, little more than one-third of its previous burden. "The recapitalisation of EMI by Citigroup is an extremely positive step for the company," Mr Faxon said. "It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity. We have already made great progress in meeting the challenges facing our industry. We have a clear vision for the future, a strong and committed management team, and now the right capital and financial structure in place to deliver successful outcomes for artists and songwriters."

Peter Spratt, a partner at PricewaterhouseCoopers, who was appointed administrator at Maltby, said: "This transaction has enabled ownership of the EMI Group to transfer without disruption. We feel that this represents the best outcome for EMI, its employees, artists and suppliers."

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk