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#699259 - 02/06/10 09:44 PM
Terra Firma/ EMI: Guy sues bailed-out Citigroup
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chiron
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Registered: 06/22/01
Posts: 1073
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Pennies for the Guy
Even if EMI reported a nice profit of about 330m euro for 08, they are about 2 bil euro in debts (Terra Firma bought EMI for about 4.8 bil).
After firing over 2000 employees and moving from Hammersmith to Kensington, losing Wadsworth, Radiohead, Macca etc. along the way, Terra Firma still heavily in red.
In other words, it is neither old business model nor illegal downloads that eat EMIs profits, but the hailed private equity model of Terra Firma (pay back the debts plus interests).
Guy Hands sues Citigroup for making him pay more than EMI was worth (isnt it the job of an investment banker to value assets correctly?). And Citigroup got bailed out by the taxpayers.
Gives the free download thing a whole new twist. Now if EMI could get rid of Terra Firma and let the taxpayers fund record labels directly.. now were talking!
"My point here is just that the old-school music business part of EMI (however unfair) is actually turning a profit, while the whole new-school finance whizz kid bit is the part that has gone badly wrong.
Thought that was well worth pointing out because a lot of business has been bought up this way and many people still haven't woken up to the danger of these highly leveraged deals (in the last few weeks, Cadbury's and Man United have been similar stories). In this case EMI could end up in the hands of a bank that has been bailed out by the tax-payer, which is er... interesting to say the least." (quoting R. Rotifer)
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#699286 - 02/07/10 01:48 AM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: Freddy]
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arclocal
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Registered: 06/23/05
Posts: 54
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Hands just overpaid when credit was easy on the assumption that the debt could be refinanced in the future. It didn't work out that way. His motivation was probably seeing all his other private equity buddies doing these types of deals and he wanted a bigger, sexier one. Not knowing shit about the music business didn't help.
More Alan Greenspan's fault than anyobody else. Sadly, the US govt's involvement in Citi (which I think Citi just paid off through floating a ton of new shares although the US gov owns a tremendous amount of their debt) isn't really material. Radiohead and Macca don't need the majors and haven't for awhile but they are unique cases.
The big loser is Hands' reputation - he really looks like an idiot and lost a lot of people a lot of money (this is probably his motivation for the lawsuit).
Not arguing, just that's how i see it.
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#699290 - 02/07/10 02:10 AM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: arclocal]
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Freddy
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Registered: 05/28/02
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Yep. And as indicated by the most recent thread, it's shaping up like this:
Citbank vs. Guy Hands + EMI vs. Guy Hands.
The guy's in a shit sandwich.
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#699292 - 02/07/10 02:42 AM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: Freddy]
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PaulCashmere
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Registered: 10/08/01
Posts: 2564
Loc: Melbourne, Australia
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Regardless, Citibank contributed to the worst financial disaster in decades and then got bailed out by the USA Government when the US government should have shut down those crooks in the first place.
I have to back EMI on this one. Yes they got stooged by Citibank but Citibank are the real arseholes here.
How the hell can they get bailed out of the government and then attack the people they screwed in the first place? Guy Hands may have fucked up doing the deal i for sure, but at the time on an Excel spreadsheet I bet it looked mighty rosey.
Citibank should not be allowed to go after anyone compromised by their own greed which caused the collapse in the first place.
If they can be bailed out, then everyone they caused pain to should be as well.
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#699298 - 02/07/10 05:42 AM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: PaulCashmere]
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Freddy
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Registered: 05/28/02
Posts: 1030
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Perhaps I should rephrase my equation above substituting "Terra Firma" for "EMI"; this could make it more clear that there are no white hats.
Directly from TF's complaint: "excluding the EMI transaction, between 2000 and 2007 Citi received fees of more that 136 million from Terra Firma and its affiliates for providing advice and/or financing in connection with almost 20 acquisition, refinancing, and securitization transactions that totaled approximately $57 billion."
$57 billion - note that - so TF's only crying over a mere $3-4 billion or so of spilled milk. As well, remember the date of the EMI transaction - 2007 - pre-bail out, so you've got the timeline switched.
Prior to 2007, the EMI that we knew and loved was publicly traded. TF and their ilk work like this: spot a dying fish, float a huge loan, buy out the shareholders for a pittance, and take these concerns private. Swallow them whole, cost-cut their flesh, and let God and the markets sort the rest of the carcass. Here's a 2007 analysis of that practice:
http://www.theatlantic.com/doc/200709/private-equity
TF claims they were stooged to overpay three pence per share on a two quid stock - yeah, those stock-holders really made out.
Bronfman Jr. and his crew previously acquired Warners via a similar leveraged buyout. But he was lucky enough to float a substantial chunk of it to the public before the bottom dropped out.
So TF's a mere tomb-raider. Can't root for that. The folks who make real money during a Gold Rush are those that sell picks and shovels and bread and eggs - on credit, of course. Not much better, that lot.
Now Citi's replied with its first pawn - asking dismissal for the case on our shores and trial in the UK, instead. If the judge concurs, the next move is in the hands of the esteemed David Boies, who filed TF's case. Interestingly, he's been in the news in California lately, fighting to overturn the anti-gay-marriage Prop 8. You may remember him from Gore vs. Bush; he's also been fighting the Spanish on behalf of Larry Ellison's yacht.
In my book, he's kinda a white hat, grey at least, so I think this would give him a convenient opportunity to wash his hands of this mess. Bear in mind I'm neither rooting for Citibank. What I'd like to see - ha ha, wishful thinking - would be that this practice somehow becomes extinct; before it trashes too many other vital ecosystems, at least. And a dream that the phoenix previously known as EMI may arise from its ashes, at least to burn the Guy on his stake.
Private equity gone bad - the rock opera. Sit back and enjoy the show.
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#700635 - 02/15/10 10:54 AM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: Freddy]
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nycbiscuit
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Registered: 09/24/02
Posts: 5304
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Hands proposed breaking up EMI four months ago
Even if he could convince Citi to refi at this point, could he actually find the add'l capital needed? I doubt it.
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#700657 - 02/15/10 12:35 PM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: nycbiscuit]
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Melchizedek
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Registered: 11/25/03
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Do you really think that Bronfman and Citigroup will let this opportunity pass them by? Also, do not rule out Irving.
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#700693 - 02/15/10 04:32 PM
Re: Terra Firma/ EMI: Guy sues bailed-out Citigroup
[Re: Melchizedek]
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nycbiscuit
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Registered: 09/24/02
Posts: 5304
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No, that's my point. Hands has been backed into a corner and the vultures are circling. Citi wants to break it up and sell it off, too. Just cutting Hands out of it. I'd be surprised if any private investors came up with the $116m to stave off default.
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