EMI has won a year's breathing space in its fight to avoid being taken over by its lender Citigroup after the music group received a £105m bail-out from Terra Firma, its private equity owner, according to the Financial Times today.
Guy Hands, chairman of Terra Firma, this week won the approval of 80 per cent of his investors to inject more of their money into EMI. Mr Hands bought EMI for £4.2bn in a deal that has become the poster child for the excesses of the buy-out bubble . "This is an exceptional vote of confidence in Terra Firma and in EMI," said Terra Firma.
The private equity group needed approval by three-quarters of investors to lift its stake in EMI to more than 30 per cent of the value of its last two funds.
The news shifts the focus at EMI to whether Mr Hands can persuade Citigroup to agree a restructuring of its £3.2bn of debt, or whether the Terra Firma boss can strike a deal with a rival music group to raise more cash by selling off part of the company. Citigroup has held out against reducing the debt load unless it were to receive equity in return, seeing no reason to do so until Terra Firma recognised that its equity in the record company behind Kylie Minogue and Coldplay was worthless.
Terra Firma wrote the value of its equity down to zero this year, however, and agreement about a restructuring could help to avert a lawsuit filed by Terra Firma against Citigroup in December. The high-profile case is due to go to trial on October 18. Mr Hands is still considering approaches to acquire 49 per cent of EMI's music publishing business, according to a person familiar with the group. The private equity group also plans to ask investors for a further £255m to cover shortfalls in earnings until 2015.
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