The Daily Swarm

“MediaMemo”:

…Terra Firma is reportedly looking for investors to lend it another $1.6 billion to keep the company afloat, in large part because it fears it will default on the money it has already borrowed from Citi.

The New York Times:

Terra Firma and Citigroup have since been locked in a struggle over control of EMI. Many analysts have speculated that the most likely outcome for EMI, which has lost prominent artists like Radiohead, is a fire sale to a rival like Warner Music Group, perhaps as part of a bankruptcy proceeding.

The case seeks to cast a spotlight on some of the more questionable elements of the gilded age of private equity deals, notably the frequency of banks advising sellers and providing financing for their takeovers, a practice known as “stapled financing.” Terra Firma said in its lawsuit that Citigroup reaped about £92.5 million from the deal.

Variety

British equity firm Terra Firma Investments has sued Citigroup Inc., claiming it paid a “fraudulently inflated price” of 4 billion pounds for EMI‘s label and music publishing interests in 2007 as a result of misrepresentations made by the lender. In the action, filed Friday in New York Supreme Court, Terra Firma claims to have lost equity in the billions of dollars as a result of its heavily leveraged purchase of the struggling music company.

The suit adds that Citi has “sought to wrest control of EMI by pushing it into, or to the brink of bankruptcy.” The lender could then sell the insolvent firm to its competitor Warner Music Group, “thus maximizing its recovery on its EMI-related loans, and generating additional investment banking fees from Warner.”
However, Citi executive David Wormsley purportedly told Terra Firma chief executive Guy Hands that another equity firm, Cerberus Capital Management, planned to place a bid on EMI. In response to this false information, Terra Firma placed a binding bid on EMI.

BBC:

The private equity company is accusing the bank, which brokered the sale, of falsely claiming that other bidders were in the frame.

Terra Firma says it raised its bid and eventually paid £4bn ($6.5bn) for EMI.

[...]

According to Terra Firma’s lawyer, Jonathan Sherman, Cerebus had actually withdrawn from the EMI auction hours before it closed.

Digital Music News:

According to Peter Lattman of the Wall Street Journal, the suit focuses on a fabricated auction process coordinated by Citibank, one that caused Terra to elevate and bind its bid. Terra is accusing Citibank of making the misrepresentations to inflate the purchase price, and ultimately advising and financing the process.

Terra also accuses Citigroup of undermining Terra’s ability to manage the label, and attempting to wrest control and orchestrate a sale to Warner Music Group. Citigroup carries about $4.2 billion in EMI debt.