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Terra Firma v Citigroup to go to court

By | Published on Thursday 16 September 2010

So, were Team Terra Firma just a bunch of arrogant, delusional fools when they bought EMI in 2007, plunging their once prosperous equity outfit into three years of doom, gloom and bad press? Or, was it that a sleazy Citigroup banker, taking time off from improving his chipping technique and screwing over the world’s economy, just gave them duff advice? Well, it’s not for us to say, frankly. That’s the question that will now be answered for us by a bunch of charming, I’m sure, New York jurors.

Yes, a New York judge yesterday gave the all clear for Terra Firma’s lawsuit against Citigroup, in relation to their audacious 2007 acquisition of EMI, to go to a full court hearing in front of a jury. As previously reported, Terra Firma chief Gary ‘The Guy’ Hands accuses the bank he used to be very cosy with of providing bad advice ahead of his big EMI buy, possibly because of a conflict of interest on the bank’s part, who were also working for the London-based major at the time.

Hands says he may not have bought EMI at all, and certainly not at the price he paid for it, had his bankers not told him there was more competition to acquire the music firm than there really was. Since the purchase, while EMI’s performance has improved, the whole company has been seriously dogged by the multi-billion pound debt to Citigroup that Terra Firma saddled the music firm with. Post credit-crunch, Citigroup was unable to split up and sell on that debt, making the major hole in the music company’s finances all the more apparent. Covenants relating to the debt have also forced Terra Firma to plunge much more of its own money into EMI than it would ever have wished to do so.

Citigroup, which denies all of Terra Firma’s claims in the lawsuit, tried to have the case dismissed last week. But, after hearing two hours of oral evidence on Friday, the judge in charge – Jed Rakoff – confirmed yesterday that he believed the equity group had enough of a case against the bank to warrant a full hearing. Not all of Terra Firma’s allegations against Citigroup will be considered before the jury – Rakoff dismissed two of the equity firm’s charges yesterday – but the allegations that the bank was guilty of fraudulent misrepresentation and fraudulent concealment will be considered.

Needless to say, Terra Firma welcomed Rakoff’s ruling, saying: “We look forward to the beginning of the trial on 18 Oct, when Citi will have to answer to a group of New York jurors”. Citigroup simply said it believed it would still ultimately win this case when it gets to court next month.

It is thought Gary himself will take to the stand during the court case. I do hope his aunt Aida will have time to finish knitting that new jumper. I heard she’s doing it in EMI’s corporate colours of red and white. Charming.