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Terra Firma v Citigroup: Hands realised his EMI mistake quickly

By | Published on Friday 29 October 2010

It was a quiet day in the ongoing Terra Firma v Citigroup court case yesterday, though there was still some chatter about the testimony of Citi banker David Wormsley the previous day, in particular with regards just how quickly Guy Hands realised that his EMI purchase was a big mistake.

As previously reported, The Worm, the banker accused of tricking Terra Firma and its top man Hands into buying EMI in 2007, has used his time on the witness stand this week to play down his role in orchestrating Terra Firma’s purchase of the music company. He’s stressed that, while EMI and Terra Firma were both clients of Citigroup, bosses at the music company had brought in another City firm to specifically advise on the sale. His role, therefore, was arranging the multi-billion pound loan that enabled Terra Firma to go through with the transaction, rather than directly advising on the takeover deal itself.

In the latter part of Wednesday’s proceedings, Citigroup’s legal man in court, Ted Wells, asked Wormsley at what point either he or Hands had realised the EMI deal was probably, with hindsight, a mistake. And it seems that realisation dawned on both men pretty quickly after the 2007 deal was done. Wormsley said Hands had confided in him as early as autumn 2007 that all was not well, and that the company he’d just bought was in a much worse state than he’d ever expected.

Almost immediately, The Worm added, Hands started to put pressure on Citigroup to lessen the burden of the three billion pound loan, accusing the bank of “nickel and diming” him with regards a debt that was “crushing” him. He added that the two men’s relationship soon became “pretty hostile” because of the loan, while an email Wormsley sent his team in 2007, shown to the court, saw the banker warn his colleagues “expect fireworks from Guy in the coming week, the truth is we funded a poor business too aggressively”.

Citigroup, of course, is trying to portray Hands as a bitter old man trying to find someone to blame for his bad decision to buy EMI in 2007, while claiming that Terra Firma’s lawsuit is simply an act of revenge after the bank refused to let the equity man off the commitments of that multi-billion pound loan despite two years of him moaning about it.

The case continues.