“EMI’s auditors have raised ‘significant doubt’ about its ability to continue as a going concern in a report that lays bare the parlous state of Terra Firma’s £4.2bn ($6.5bn) investment in the music company behind Katy Perry and The Beatles,” Andrew Edgecliffe-Johnson and Salamander Davoudi report for The Financial Times.
“Guy Hands, Terra Firma’s founder and chairman, has written to investors in two of its private equity funds asking them to inject another £120m, subject to EMI Music producing a new strategic plan,” Edgecliffe-Johnson and Davoudi report. “He must come up with the money by June 14 or risk losing the company to Citigroup, his bankers.”
“However, accounts for the year to March 2009, released on Thursday, make clear that even if Terra Firma secures this equity, it will face another “significant shortfall” against a test on covenants in its loans by March 2011,” Edgecliffe-Johnson and Davoudi report. “Unless it can persuade Citi to restructure its £3.2bn in loans by then, investors face further cash calls. Terra Firma spent £105m to make up shortfalls against the quarterly covenant tests last year, but has less than £10m left for future payments.”
Edgecliffe-Johnson and Davoudi report, “Citi declined to comment, but one person familiar with its thinking said it had no plans to help Mr Hands by restructuring the loan. ‘They’re going to let him spin himself into the ground and will sit back and watch the show.’”
Full article here.
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