EMI Owners Overpaid For The Struggling Music Firm

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British private equity firm Terra Firma Capital Partners Ltd is improving results at EMI, but said it might have “paid too much money” for the debt-laden home of the Beatles and Coldplay.

Chairman and chief investment officer Guy Hands said Terra Firma boosted earnings at EMI’s recorded music division to about 160 million pounds ($263 million) last year from around $82 million when it was bought in 2007.

In a speech at a Dow Jones private equity conference on Thursday, he forecast that earnings this year at that division would be over $330 million.

Hands said talks with Citigroup Inc, the bank that holds EMI’s debt, were ongoing in a “gentlemanly” and constructive way. He would not be drawn on the possible outcome of those talks.

“Will we get to a solution that’s a win-win for all stakeholders?” he said. “I don’t know, but I certainly know there’s desire from all parties to do it. Right now, the reality is we’re improving the company as much as we can.”

Terra Firma’s struck its ill-fated $6.5 billion buyout of music business EMI at the height of the buyout boom.

The ailing music group accounted for the vast majority of Terra Firma’s $1.96 billion writedowns this year and Terra Firma was forced to inject extra capital into EMI twice in just six months.

Citi is holding the debt package associated with the deal after an attempt to sell some on to secondary investors was thwarted by the credit crunch.

A source familiar with the negotiations said Terra Firma offered to inject $542 million in equity in return for the bank agreeing to a restructuring of the debt. But the more EMI’s performance improves, the less urgent the restructuring is.

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Source: Reuters

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