Citigroup Inc. has seized control of EMI Group Ltd. from beleaguered financier Guy Hands, acquiring 100% of the share capital on a restructuring that saw the company's debt load cut to £1.2 billion from £3.4 billion.
The transaction ends a long-running saga triggered by Hands's £4 billion buyout of the U.K. 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 completion, the deal rapidly soured. Declines in the recorded-music market, already significant, accelerated, and the financial crisis made a debt-syndication deal all but impossible, leaving Citigroup holding about £3 billion of deal-related debt. EMI continued to struggle to meet banking covenants, while Citi has refused to renegotiate the debts.
The eventual showdown came in a 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 recapitalization 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.
EMI is also home to the Beatles and Coldplay, and it has a rich catalogue of tunes to license. As a result, private-equity firms and rival music companies are jumping at the opportunity to buy some or all of it.