There is a chance that the first Terra Firma and its top man Guy Hands knew about Tuesday’s big announcement that Citigroup had taken ownership of EMI was when said announcement was posted on the newswires. According to the FT, the move by the US bank came weeks and possibly months earlier than Terra Firma had expected.
Of course, we were all pretty certain that Terra Firma’s backers would not provide EMI with the cash it needed to meet the covenants of its loan with Citi, causing the bank to take ownership this spring. But when The Observer claimed early last month that that could happen within weeks, a Terra Firma source – speaking off the record as usual – told Music Week such talk was “a nonsense” and that “nothing will happen regarding the equity group’s ownership of EMI until March at the earliest”.
So, how could Citigroup make its grab for EMI without consulting Terra Firma? Well, according to Billboard, because the specific holding company to which the multi-billion pound debt was directly linked – Maltby Investments Ltd – only had two directors, EMI CEO Roger Faxon and EMI CFO (and former Terra Firma exec) Ruth Prior.
While one of the other Maltby holding companies has five Terra Firma twonks on its board, that didn’t matter because once Maltby Investments was put into administration, and PricewaterhouseCoopers had been appointed administrator, the unstoppable process had begun which allowed Citi to take ownership of EMI.
Billboard says Citigroup asked Faxon and Prior, as directors of Maltby Investments, if there was a “balance sheet insolvency/technical default” with the company. They had to conclude there was, and so the administration could begin. With the clear benefits to EMI of Terra Firma being cut out of the equation, neither Faxon nor Prior were likely to put up any fight to stop the administrators doing their job.
Of course, Terra Firma knew that, aside from handing over £100 million to EMI, Citigroup taking ownership was inevitable, and there was nothing it could do to stop it. Still, it would have been nice to be kept in the loop as to what was going on, which, if these reports are to be believed, was very much not the case. All Terra Firma has said this week about losing control of a company into which it pumped £1.75 billion is one sentence issued by its retained financial PR agency Finsbury, which went like this: “Terra Firma is pleased that EMI’s debt burden has been reduced”. Less pleased with everything else, presumably.
Elsewhere in EMI news, the FT cites sources as confirming that Citigroup is not in a mad panic rush to sell the music major, and any sale could take up to a year to complete. Meanwhile Music Week quotes Tim Clark, co-manager of one of the music firm’s biggest acts, Robbie Williams, as saying he thinks this week’s move by Citigroup was good news for EMI, and that their current label partners will be very much on the meetings list as they negotiate a new record deal for the Robster.
Clark: “We are not discounting a new deal with EMI and we will be looking at them in the same way we will every other record company. EMI is in a fantastic position right now. All of the debt has now disappeared, they are making a profit and there is now a real hope for the company”.