New financing will apparently prevent foreclosure
LONDON — Terra Firma appears to have raised the funding it needs to prevent lender Citigroup from foreclosing on embattled music giant EMI Group, according to unconfirmed reports on Tuesday.
The Wall Street Journal is claiming that Terra Firma chairman Guy Hands succeeded in persuading 75% of his fund’s backers to inject a further £105 million ($156 million) so that EMI could meet banking covenants agreed to with Citigroup.
However, Terra Firma is remaining tight-lipped, with a spokesman reiterating to Daily Variety that there would be no comment on the outcome of Monday’s vote by investors.
Nevertheless, citing unnamed sources, the WSJ says EMI plans to inform Citigroup on Friday that it will be able to raise the money it needs by mid-June to prevent the company from breaching loan agreements.
Financial experts note that no matter what agreements Terra Firma has secured, the fact that EMI has already breached a number of loan covenants with Citigroup means it is not in the clear. However, it would be highly unusual for a bank to call in its loans if interest payments are being met.
Hands apparently has a bigger plan to try to secure nearly $550 million from investors, which could keep EMI safe until 2013, when Terra Firma’s loan commitments with Citigroup could be renegotiated.
In the meantime, Hands and Citigroup are due in court this fall after the Terra Firma boss filed a lawsuit accusing the bank of tricking him into paying too much for the music company.
Until either Terra Firma or Citigroup confirm what has happened, EMI’s staff face an anxious wait — reports claim the bankers have appointed accounting firm PricewaterhouseCoopers in case it needs to put EMI into administration and break it up for sale.
But if Hands has convinced his backers to reach a little deeper into their pockets, it could be that they have been tempted by his projected 58% return on their investment should Terra Firma successfully exit EMI by 2015.