Terra Firma chairman files another lawsuit against Citigroup – this time over way it took control of the UK music company
Guy Hands has launched legal action against Citigroup over the way it wrested control of the music company EMI from him seven months ago.
Terra Firma, the venture capital firm run by Hands, has filed legal action in the high court seeking to force Citigroup to provide full evidence as to why it took control of EMI in February.
The US bank, which supplied Hands with the debt to fund his £4.2bn acquisition of EMI in 2007, took control of the British music company when Terra Firma could no longer support the £3bn Citigroup was still owed. EMI's board of directors appointed PricewaterhouseCoopers as the independent administrator, which determined that Citigroup should take control.
A source close to Hands says the financier is seeking information from Citi about the grounds under which it was able to exercise taking control as well as the valuation attached to EMI.
Hands believes that all payments on debt had been maintained up until Citi took control in February, although EMI was expected to break a test of its banking covenants at the end of the first quarter.
A procedural hearing is understood to have taken place on Tuesday, when an application for information was made by lawyers representing Terra Firma.
Earlier in the summer, Citigroup put EMI up for sale, a process expected to be completed by next month – although it is now unclear whether the legal action would disrupt this timeline.
Hands had been fighting a rearguard action in attempting to hold on to EMI. In January, he lodged an application to challenge a verdict delivered in November after a New York jury cleared Citigroup of tricking the private equity firm into overpaying for EMI.
Bidders for EMI are thought to include Len Blavatnik, who is in the final stages of completing a $3.3bn takeover of Warner Music; the billionaire Gores brothers; and German giant Bertelsmann, which is attempting to build its music publishing business BMG Rights Management, a joint venture with private equity group KKR.
Sony Music, which is thought to have worked with Bertelsmann on an unsuccessful bid for Warner Music, and Universal Music have also assessed EMI's recorded music and publishing assets.
Artists signed to EMI labels include Coldplay, Katy Perry and Tinie Tempah.
Citigroup has previously said that it will consider "all offers" for the business and is not wedded to the idea of selling EMI as a whole, which is the preferred option for Roger Faxon, EMI's chief executive.
Terra Firma, Citigroup and EMI declined to comment.
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