Gary reflects on EMI
By CMU Editorial | Published on Thursday 24 February 2011
Unless rumours that Gary ‘The Guy’ Hands is considering making a bid for Warner Music, or even to buy back EMI from Citigroup, turn out to be true, this could prove to be the last word from the infamous financier about his billion-dollar losing musical adventure, ie Terra Firma’s doomed acquisition of EMI.
In a letter to his investors, published by the Wall Street Journal, Hands expresses regret that Citigroup chose to repossess EMI rather than work with him to restructure the flagging music firm’s debts.
He writes: “As you will be aware, on 1 Feb 2011, Citigroup assumed ownership of EMI having completed a debt for equity swap. We are disappointed that we could not reach an agreement with Citigroup (despite great efforts from our side) that would have involved us putting in more equity simultaneously with Citigroup writing down their debt”.
He continues: “However, as we could not reach agreement with Citigroup on the valuation of EMI, they felt that it was in their interests to take over the business in order that it could be sold as and when they feel appropriate. Our direct involvement in EMI is therefore over”.
The legal dispute with Citi, though, continues, with Hands confirming the equity group will continue to appeal the US court ruling from last year which ruled against his claim that the bank misled him into bidding too soon and too high for EMI back in 2007.
On that he wrote: “We continue to be indirectly involved through the appeal of the legal rulings made by the court in relation to the litigation against Citigroup. Our lawyers will continue to progress this and we do not expect any rulings in this matter until sometime next year”.
Whatever happens with that legal squabble – Hands, of course, is seeking damages to cover some of the nearly two billion he lost on EMI – the equity chief told his investors that he was confident that other investments made by the Terra Firma funds that enabled the EMI acquisition would be profitable, and slowly but surely ensure the funds, overall, come good.
Despite rumours that many of Terra Firma’s investors were highly concerned about Hands’ continued support for EMI last year as it became clear the music firm would need further cash injections to avoid repossession, Hands says in his letter that his backers remained supportive. He adds that when he asked investors to back a potential further 622 million euro investment into EMI late last year (an investment that would have been linked to Citigroup restructuring debts, which never happened in the end) “you [ie his investors] supported us with a vote of over 80% of the partnerships”.