Citi seizes EMI
(2 February 2010 – USA) United States banking giant Citigroup has taken control of music group EMI from financier Guy Hands who lost a court battle against the bank last year.
Citigroup has acquired 100 percent of the share capital under a restructuring which saw the music groups debt cut from ₤1.2 billion (A$1.9 billion) from ₤3.4 billion.
The hand over brings to an end a long-running saga brought about by Mr Hands' ₤4 billion buyout of the British music group in 2007 through his private equity firm Terra Firma.
The highly leveraged acquisition, at the height of the boom, was financed with debt from Citigroup.
After the deal was financed it rapidly soured due to significantly accelerating declines in the music market, leaving Citigroup with around ₤3 billion of deal-related debt
EMI continued to struggle to meet banking covenants, while Citigroup refused to renegotiate the debts.
The dispute came to a head in New York courtroom in November when Mr Hands failed to convince a jury that he had been duped by Citigroup into making a rich bid for EMI.
Citigroup's acquisition of EMI comes just ahead of the company's next test of its performance against banking covenant targets that EMI wasn't expected to achieve.
'The recapitalisation of EMI by Citi is an extremely positive step for the company,' said Roger Faxon, EMI's chief executive.
'It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity. With that solid footing, we are confident in our ability to drive our business forward,' he added.
Potential bidders had already been circling EMI ahead of Citigroup's acquisition, people familiar with the situation said.
The hand over brings to an end a long-running saga brought about by Mr Hands' ₤4 billion buyout of the British music group in 2007 through his private equity firm Terra Firma.
The highly leveraged acquisition, at the height of the boom, was financed with debt from Citigroup.
After the deal was financed it rapidly soured due to significantly accelerating declines in the music market, leaving Citigroup with around ₤3 billion of deal-related debt
EMI continued to struggle to meet banking covenants, while Citigroup refused to renegotiate the debts.
The dispute came to a head in New York courtroom in November when Mr Hands failed to convince a jury that he had been duped by Citigroup into making a rich bid for EMI.
Citigroup's acquisition of EMI comes just ahead of the company's next test of its performance against banking covenant targets that EMI wasn't expected to achieve.
'The recapitalisation of EMI by Citi is an extremely positive step for the company,' said Roger Faxon, EMI's chief executive.
'It has given us one of the most robust balance sheets in the industry with a modest level of debt and substantial liquidity. With that solid footing, we are confident in our ability to drive our business forward,' he added.
Potential bidders had already been circling EMI ahead of Citigroup's acquisition, people familiar with the situation said.
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