LOS ANGELES — Citigroup has taken over debt-strapped EMI Group, closing a disastrous purchase of the music label by Guy Hands, founder of British private equity firm Terra Firma.
The foreclosure by Citigroup, EMI’s main lender, brings the label of British acts such as The Beatles and Pink Floyd under American control until a new buyer can be found.
The takeover had been long expected but came more than a month before Terra Firma Capital Partners Ltd. officially defaulted on roughly $5.48 billion of borrowings it took on to buy the label in 2007.
Citigroup’s move eliminates some uncertainty over EMI’s future and restructures EMI by reducing its debt by 65 percent to $1.9 billion. Citigroup booked a $3.5 billion loss, while Terra Firma saw its $2.8 billion investment evaporate.
The agreement leaves EMI, which also represents Lily Allen, Katy Perry, Coldplay and dozens of other acts, with more than $480 million of available cash, enough to fund its operations, and a sustainable level of debt.
For now, it won’t have to rush into the arms of a financial savior, although companies like Warner Music Group and private equity firm Kohlberg Kravis & Roberts have been jockeying to buy the company.
EMI now has “the ability to invest in and grow its business,” said Stephen Volk, the Citigroup vice chairman who will become the chairman of EMI’s holding company, Maltby Acquisitions, in a statement. “This is a positive development for EMI, its employees, artists, songwriters and suppliers.”
