Guy Hands' Terra Firma to appeal EMI court ruling

Terra Firma, the private equity firm run by Guy Hands, is to challenge a US court ruling it was not conned into paying too much for music business EMI in a £4.2bn deal three years ago.

The ruling in November, the culmination of a high-profile legal showdown between Mr Hands and his former ally David Wormsley, the Citigroup banker who managed the sale of EMI, was widely seen as presaging the end of Terra Firma's control. It borrowed £2.6bn from Citigroup to fund the deal and is now struggling to maintain interest payments on the debt – having lost the case, it is thought to be unable to persuade its own investors to put more money into EMI and could be forced to hand the company to the bank within months.

An appeal against the ruling, however, could stop the clock. "Boies, Schiller and Flexner, on behalf of Terra Firma, filed a notice of appeal in the litigation against Citigroup," the private equity firm said yesterday. "The appeal will challenge legal rulings made by the court in the litigation." The statement suggests Terra Firma will challenge some of the legal technicalities of the case, rather than theverdict, which saw it miss out on compensation after the court rejected suggestions Citigroup had persuaded Mr Hands to overpay for EMI by falsely claiming other parties wanted to buy the music company. Even so, the appeal will throw the battle for control of EMI into confusion.

Analysts expect EMI to breach its banking covenants at the end of March, paving the way for Citigroup to take control three months later, though there have also been suggestions that Terra Firma and the bank might agree a restructuring of EMI that could see its ownership switch even sooner. Citigroup is understood to have lined up buyers for different parts of the EMI business, who would also be frustrated by legal hold-ups. The music company, meanwhile, is trading relatively well, and continues to hold valuable rights, representing artists ranging from Kylie Minogue to The Beatles.

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