Terra Firma in race for EMI investor backing

Private equity group Terra Firma was last night locked in talks with investors to secure the funds it needs to avoid losing control of its music label EMI this week.

Guy Hands, the buy-out maverick who runs Terra Firma, believes he has enough support from investors to raise £105m by the end of Friday. Investors were asked to let the company know if they backed the move to inject more cash into the ailing business by the end of yesterday.

Company insiders said they were still waiting to hear from all of EMI's 200 investors from across the globe and were not able to release the results last night. More information is expected to emerge today as the firm faces a race against time to secure enough funds to meet its debt covenants.

Should it receive backing, Terra Firma is understood to be likely to return to shareholders to ask them for a further £255m to cover loans due to mature in 2015.

This comes after it emerged that Queen has moved to a rival label after four decades at EMI. The pop group is to move its recorded music contract, which covered the rights outside of the US, to Universal Music when the contract expires, but it has held on to the music publishing contract. This covers licensing the songs for film, television and advertising.

Pink Floyd, another of the label's stalwarts, recently won a legal battle against EMI over selling individual tracks over the internet. It is understood that the band has since held talks with rival labels.

EMI, whose artists include Lily Allen, Robbie Williams and American country music group Lady Antebellum, has a heritage stretching back to 1931, when the Electric and Musical Industries was formed. It opened the iconic Abbey Road recording studios later that year.

Guy Hands masterminded Terra Firma's takeover of the group in 2007 for £4.2bn, shortly before the leverage bubble collapsed. The deal left Terra Firma with £3.2bn of debts predominantly provided by Citigroup. The music company has struggled to deal with the digital revolution – especially online piracy – and the onset of the credit crunch. It has also seen an exodus of talent. Sir Paul McCartney left just before the takeover, while Radiohead and the Rolling Stones departed soon afterwards.

Last month EMI's attempts to strike licensing deals with two of its rivals collapsed after failing to agree terms. Shortly before, EMI was rocked when chief executive Elio Leoni-Sceti quit the group. Charles Allen, who took over as executive chairman of EMI, has drawn up plans to rebuild the label.

Ideas to raise money for the group include selling its Japanese business and its Christian music arm. He presented the plan to Mr Hands for approval, and it was then sent on to the fund's investors along with a request for investment two weeks ago.

There are fears that if the private equity company fails to meet its obligation, EMI will be seized by Citigroup, broken up and sold off. Terra Firma's relationship with Citigroup has become strained, after it launched a lawsuit against the bank. Mr Hands alleged that the US group had led him to believe other bidders were interested, pushing up EMI's price.

Talk emerged over the weekend that Sony Music may be interested in a bid for its rival. Yet the company retreated yesterday saying comments made by the business's head, Rolf Schmidt-Holtz, had been misinterpreted and it was not currently in talks over a potential bid for EMI.

BMG, which is owned by Bertelsmann and private equity group KKR, recently said it was not considering a bid for EMI in the short term. Universal has also said it has not held talks over a potential takeover.