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The end of EMI is nigh?

Robert Peston | 21:01 UK time, Wednesday, 1 December 2010

Sooner or later - and it may be sooner - we are likely to see the end of a once great British corporate name, and a still resonant name in the music business, EMI.

Because those close to EMI tell me they expect Citigroup, the giant US bank, to seize control of the business and then quickly sell it off in pieces.

For reasons that aren't entirely clear to me, there is a belief at EMI's current owner, Terra Firma, that Citi may attempt to take control of EMI fairly imminently - although I am not sure how that can happen earlier than March (see below).

The expectation is Citi would then sell EMI's music publishing arm to the private-equity house KKR for about £1.2bn.

And EMI's recorded music business would be expected go for just £400m, probably to Warner Music - though such a takeover would face tough scrutiny by the European competition authority.

In theory, Citi won't have the formal right to take ownership of EMI until at least March, because that's when Terra Firma expects to be in formal breach of the terms of its borrowing agreement with Citi (Terra Firm will probably pass this month's covenant test).

Citi is owed £3bn in respect of Terra Firma's takeover of EMI, which is considerably more than EMI is worth today. So it looks as though Citi will ultimately lose about half its money.

As for Terra Firma, the equity it put into the deal of £1.7bn is currently worthless.

If EMI is worth around £1.6bn today, which - I am told - is what Terra Firma's founder Guy Hands believes, then Terra Firma will end up losing the lot.

Comments

  • Comment number 1.

    "You needs hands" sang Max Bygraves all those years ago.

    But not Guy Hands.

    As soon as he lost that case, the game was up.

    Hands maybe should've checked out the music industry a bit more carefully before he got involved.

    To even survive is an achievement, let alone make a profit.

    Generally speaking, only a total shark could possibly prosper in that environment.

    Which funnily enough leads one naturally to the aircraft industry, where the same applies.

    Those who are wide awake might see a link.

  • Comment number 2.

    such a shame a huge company like EMi has disappeared into history.
    What has happened to the talent they once employed? This is the lost once a fund invests then gets rid of talent in search of profits.
    Still I do have a collection of 45's left for history with EMI centres.....

  • Comment number 3.

    EMI, ha ha ha ha

  • Comment number 4.

    And, in the end, the the love you take, is equal to the love you make.

  • Comment number 5.

    #3 EMI, ha ha ha ha

    This is exactly what I was going to post (well, actually I was only going to use "ha" three times).

    This is no great loss, in fact it is no loss at all. The music industry is a dinosaur, and perhaps this can be the beginning of the end for them and their destructive practices that hinder creativity, rather than nourishing it.

    The fact that the hedge fund, Terra Firma, are going to lose £1.6 billion is the icing on the cake, and how lovely that CitiBank are going to lose out too (although probably only the equivalent of a few bonuses). Schadenfreude? Absolutely. More stories like this, please.

  • Comment number 6.

    Wow, what incredible value destruction.

    But I imagine Guy Hands won't suffer personally.

    And he's now resident in Guernsey of course........

    It's farcical, isn't it!...... UK tax havens only accessible by an elite of rich people.... and subsidised by us mainland UK taxpayers for heavens sake!

    But the substantive point is that these highly leveraged deals should be seen for what they are - a simple arbitrage play to divert the tax on a companies profits that should have been paid to the government, into the pockets of the private equity guys by saddling it with debt, and benefiting from the tax deductibility of interest payments.

    If we levied corporate tax on profit before interest, rather than after interest, most of these obscenely leveraged deals would simply not have taken place.

    Let's put it another way..... if we think our economy is becoming dangerously unstable due to massive indebtedness, why on earth are we publicly subsidising debt anywhere?

    We stopped subsidising debt for householders some time ago (MIRAS etc), so someone please explain to me why we should be doing it for corporates?

  • Comment number 7.

    Terra Firma ground is anything but sound with EMI! It paid too much and couldn't unload EMI quick enough on some other poor dupe. That is how casino capitalism goes - sometimes you win, but in the end most of the time you lose.

    They paid 3.2 £bn (of which shares 2.4 £bn) for EMI in 2007, wrote off 1.3€Bn in 2009 so it looks like they will have to write off over a billion. Chicken feed to a casino private equity company!

    Frankly, I despise all private equity companies and do not look kindly on any of their highly subsidised activities. Make no bones about it - we the taxpayer will take (or will have already taken) a huge hit with all of the sectors deals. They rely on huge taxpayer handout to conduct their rather unpleasant business activities - without the tax breaks the industry would not exist. I don't think it should exist! It is the unacceptable face of capitalism and we the taxpayer subsidise it enormously. The taxes on the poor are much much higher because these people get the tax breaks - it is simply wrong morally, and economically.

  • Comment number 8.

    Guernsey tax exile according to Wikipedia. Result.

  • Comment number 9.

    Can't say I've been following this closely, but am I right in thinking that Citibank lent Terra Firma the best part of £3bn to buy a company which, 3 years later, has a value of £1.6?

    Any news on whether the Masters of the Universe at Citibank will be getting bonuses for displaying such astounding business acumen?

  • Comment number 10.

    First MFI then EMI...............flat pak banking at its best.

  • Comment number 11.

    Ha, Ha, Ha, Finally it may happen? To quote Malcolm and the Sex Pistols ,
    Good bye EMI!
    No longer a unlimited supply?

  • Comment number 12.

    Now Robert, what did you inform (warn?) us of in your book a couple of years ago?

    All that leveraging, stripping of the assets, the talents on the mega-dive to the bottom to maximise profit....

    Pat yourself on the back.

    Again.

  • Comment number 13.

    Sums up all that is wrong. They borrow money from Banks, add a little of their own and have a gamble. If it all goes wrong our money (perhaps not in this specific case) is used to support the Banks. If it goes right everyone is a winner, but we (the ultimate backstop) get least.

    Dear Bank, I think I know what will win the 3.15 at Lingfield at 50 - 1. Can you lend me $1bn at 3%?

  • Comment number 14.

    And in the end, the cash you stake, if far more than the cash you make.

  • Comment number 15.

    Strangely enough I received a letter from EMI on Monday. Informing me about some money due from my Pension Fund. It was my first job out of University in1966, in the Aireborne Radar division at EMI Electronics at Blythe Road in Hayes. I only stayed for 18 months before moving back up North.
    How the Mighty have fallen.

  • Comment number 16.

    Hi Robert
    Congratulations on some business news for a change. May we have more please.
    [[[6. At 22:57pm on 01 Dec 2010, Noideaatall wrote]]
    I have to agree that allowing such substantial PE loans to finance acquisitions does need looking at BUT its a very complex area and simply remoeving the profit offset would create many more problems.
    On the EMI issue yes Hands got his timing wrong but it does show how the internet has wreaked havoc on many traditional businesses. More to come I suspect.

  • Comment number 17.

    Glad to see this is a classic example of capitalists taking risks and loosing money. No taxpayer subsidy for this one hoorah.

  • Comment number 18.

    @6 - Noideaatall "And he's now resident in Guernsey of course........

    It's farcical, isn't it!...... UK tax havens only accessible by an elite of rich people.... and subsidised by us mainland UK taxpayers for heavens sake!"

    Wrong on several counts - Guernsey is not part of the UK it is a Crown Dependency. The UK taxpayer contributes not one jot to the economy of the island. I live in Guernsey and I'm not rich.

    To be slightly pedantic the island isn't technically a tax haven - its actually a low tax jurisdiction. And before anybody goes off on one about "tax havens" you might wish to know that the island has one of the best regulated financial services systems anywhere in the world.

    Whether that makes any difference to your views on places like Guernsey I very much doubt!

  • Comment number 19.

    Unlimited supply (E.M.I)
    There is no reason why (E.M.I)
    I tell you it was all a frame (E.M.I)
    They only did it 'cos of fame (E.M.I)
    I do not need the pressure (E.M.I)
    I can't stand those useless fools (E.M.I)
    Unlimited supply (E.M.I)
    Hello E.M.I
    Goodbye A & M

  • Comment number 20.

    Losing £3Bn + is that something the directors of Terra Firma should feel bad about? Or what a shame let's move on! Or will I stay for my fat bonus alternatively there is a whopping pay-off for failure?

  • Comment number 21.

    A dirty great big destruction of value. Nothing new there. Lots of FTSE 100 boards have got very rich during the last decade when the accumulated value of 'their' companies has sunk. Funny, isn't it? Someone asked how come it's only in banking that doing a really poor job gets you heaps of money? They might be the worst but the've become the role models for business all over the UK.

    You just know, without any inkling of doubt, that Terra Firma won't lose £1.6bn. Somehow in the byzantine world of the City's profit and loss system the people to pay for Mr Hands crazy grab will be the taxpayer.

  • Comment number 22.

    All this user's posts have been removed.Why?

  • Comment number 23.

    #13. Boilerbill wrote:

    "Dear Bank, I think I know what will win the 3.15 at Lingfield at 50 - 1. Can you lend me $1bn at 3%?"

    Don't think you have the full appreciation of today's banking... It should read 'give me $1bn for which I will pay you nothing and which I will not pay you back' - you need to keep up with QE!

    (I assume Lingfield is an all weather track! - checked, it is - but today's meeting is abandoned because of snow!)

  • Comment number 24.

    #17. ObserverinMonmouth wrote:

    "Glad to see this is a classic example of capitalists taking risks and loosing money. No taxpayer subsidy for this one hoorah."

    If that were only the case! We (the Taxpayer) have already paid over and over again because of the absurd tax breaks that are the only reason that 'private equity' exists at all!

  • Comment number 25.

    All you need is love (of money)
    All you need is love (of money)
    All you need is love, love (of money)
    Love (of money) is all you need (to convince youself you can revitalise a dying business in the dying music recording industry.)

    John Lennon eat your heart out...

  • Comment number 26.

    The music middle-men bled consumers dry for years - high street retailers broke EMI by overcharging. The resentment built up amongst music lovers was only too real.
    (£16+ for a 20p CD? No thanks). The UK operated as Treasure Island once again as practically every other country on earth paid far less for the same product.
    Consumers, for once, benefited from a decline in prices which was brought on by mass law-breaking and technological advances. Is this what it takes to get the price mechanism to work properly?
    Of course if the music industry had managed to prevent that technology (mp3s, the internet, diownloads) from becoming available then everyone in the UK would still be paying £16+ for something worth far, far less. And there we have the problem. A disincentive to progress created by a virtual cartel. And meanwhile the actual creators of the music were paid very little compared to all of the middle men involved.
    Is it sad to see it go? No, thats the nature of business and if a few of them would die earlier we'd be paying less for many other things. The Music industry has managed to keep itself afloat through format changes (vinyl, tape, cd) and low quality product ensuring obsolescence and another round of purchasing by consumers of the same product again and again. Remember when cd's first appeared and we had TV shows demonstrating how indestructable they were by spreading jam on them and showing how they still played? Drop your DVD on the carpet these days and it will never play properly again. Why? A classic example of a vast profit-chasing business wanting you to pay repeatedly for the same old nonsense in order to maintain their inordinate profits. A deliberate decline in quality accompanied by rising prices

    And so we have the housing market. We all rejoiced like prize morons every time house prices increased. Its the same old process as the record industry with a lot of middle men (sadly, half of the UK) trying to cash in on something with an increase in price and declining true worth. Buying the same old thing over and over again and wasting our time working in order to pay for it. Out of control mass irrationality and now most of us are paying the price for our short-term 'gains' in other ways.

  • Comment number 27.

    'And the roads jam up with credit,
    and ther's nothing you can do,
    and it's all just bits of paper,
    flying away from you...'

    From 'The Road to Hell' by Chris Rea. Sums it all up really.

  • Comment number 28.

    The fact that the hedge fund, Terra Firma, are going to lose £1.6 billion is the icing on the cake, and how lovely that CitiBank are going to lose out too (although probably only the equivalent of a few bonuses). Schadenfreude? Absolutely. More stories like this, please.

    .....................................................................................................................


    Yep, don't we all love private equity firms, my own theory is that firms like Terra Firma and KKR only buy these firms to raid the pension funds, A bit like a paedophile who befriends an unmarried mum to get at her kids. Still, this is the financial world we created.

  • Comment number 29.

    26. At 10:18am on 02 Dec 2010, i wrote:

    Great post - I share the sentiment entirely with respect to the music industry. They only got what they deserved - for being greedy, devoid of business foresight and obstinate (to progress).

    Not quite sure your analogy works with house prices. Yes, middlemen made lots of money in the process - hopefully, advances in online estate agency type of arrangements will eventually get rid off the "professionals" whose only achievement was to whip up the house prices for their own benefit; they rarely add any value to the process. However, houses in the ownership format are unlikely to disappear any time soon...

    I think better analogy would be the banking cartels - where deals are created out of thin air to only benefit the middlemen. In the end we all end up paying for the same twice - first by the loss of economic opportunities and tax avoidance and secondly supporting the bust (through the very actions) banks via our taxes.

  • Comment number 30.

    I can't believe no one has mentioned this paean to Terra Firma and Citicorp. With apologies to EMI's most lucrative signing whilst Messrs Lennon and McCartney were still working together.

    Say hello to EMI
    Waive goodbye to loads of money.

  • Comment number 31.

    Perhaps Malcom McLaren, John Lydon and crew had a far better insight into EMI than we gave them credit for. Did they predict EMI's downfall some 30 odd years ago?

  • Comment number 32.

    At 08:27am on 02 Dec 2010, Gilthead wrote:

    "Wrong on several counts - Guernsey is not part of the UK it is a Crown Dependency. The UK taxpayer contributes not one jot to the economy of the island. I live in Guernsey and I'm not rich.

    To be slightly pedantic the island isn't technically a tax haven - its actually a low tax jurisdiction. And before anybody goes off on one about "tax havens" you might wish to know that the island has one of the best regulated financial services systems anywhere in the world".

    You've said it yourself - this is pure pedantry. Guernsey is a UK sponsored tax haven, pure and simple.

    And as for the UK taxpayer not contributing one jot to the island, I think you are on rather dangerous ground here.

    Was there not, er, rather a significant moment in the last century when the UK taxpayer, in the form of its armed forces, contributed quite a lot to the island. Or are you saying the Channel Islands do not now need the UK in any shape or form for their defence?

    A fair society is one where people pay taxes according to their means, no more no less.

    It is not one in which the ultra low tax breaks are only available to the very rich, whether through being able to afford huge teams of tax accountants or arbitraging their residency here and there to this tax haven or that tax haven.

    We need two big changes to the UK's whole attitude to tax - firstly, a much much simpler system, and secondly the elimination of UK tax havens together with as much UK pressure to eliminate dodgy foreign tax havens too.

  • Comment number 33.

    32. At 12:06pm on 02 Dec 2010, Noideaatall wrote:
    At 08:27am on 02 Dec 2010, Gilthead wrote:

    "Wrong on several counts - Guernsey is not part of the UK it is a Crown Dependency. The UK taxpayer contributes not one jot to the economy of the island. I live in Guernsey and I'm not rich.

    To be slightly pedantic the island isn't technically a tax haven - its actually a low tax jurisdiction. And before anybody goes off on one about "tax havens" you might wish to know that the island has one of the best regulated financial services systems anywhere in the world".

    You've said it yourself - this is pure pedantry. Guernsey is a UK sponsored tax haven, pure and simple.

    And as for the UK taxpayer not contributing one jot to the island, I think you are on rather dangerous ground here.

    Was there not, er, rather a significant moment in the last century when the UK taxpayer, in the form of its armed forces, contributed quite a lot to the island. Or are you saying the Channel Islands do not now need the UK in any shape or form for their defence?
    ==================
    Gilthead is correct (named after the delicious fish perhaps?).
    I think you will find that the Channel Islands were abandoned to their fate and were occupied by Germany for most of the war.
    A good choice of name on your part?
    And No I don't live in the Channel Islands, but the UK although I once went to Jersey for the weekend.

  • Comment number 34.

    The death of the music industry is not inevitable. It's just that the music corporations wish to make money without doing any work. Apple managed to do what none of the music corporations managed, i.e. make money out of music. How did they do this? They built an innovative product that people wanted. The space is still there in the market for anyone with enough R and D clout. mp3s are not a quality music format and people are still willing to pay for quality. I can certainly think of innovative music products (which I don't intend to share by the way) but I don't have the backing of major artists to help market my ideas. All the music companies need to do is innovate because people would buy music if the format added enough value compared to an mp3.

  • Comment number 35.

    It's easy for poeple to think of EMI as just a music company but after the last world war they were an electronics power house inventing things like the CT scanner. This is really the sad send to a long slide that started way before Guy Hands.

  • Comment number 36.

    "The death of the music industry is not inevitable." - #34

    I am a computer programmer, and I strongly disagree with the above. In fact, I give it ten years, tops.

    We'll see. :-)

  • Comment number 37.

    re #32 - "A fair society is one where people pay taxes according to their means, no more no less."

    No, that's not fair at all - a fair society would be one where everyone paid the same proportion of the income in taxes - differing tax rates just penalise the hard working, and removes the incentive to improve yourself.

  • Comment number 38.

    29. At 10:47am on 02 Dec 2010, Ian wrote:

    Cheers. Perhaps my houseprice analogy wasnt that clear. Basically I view the record industry (as it was) and the housing industry as perverst markets.

    Consider this.

    If House prices operated as they should then older houses would be worth less than newer ones. The price would go down, rather than being an investment vehicle. This would mean that a 3 bedroom house would cost less in the same way that a second hand record or car (mostly) does.

    This would mean that you would pay say, £50k for a house but it would lose value. However, because all other houses lost value at the same rate then the replacement cost for that house would be the same.

    Combine this with cutting the banks out of the loop (no bubble, no chasing investment opportunitues where there aren't any) and no global economic downturn (ideally). Heres why. Most of the ills of the current economic system are caused by its success - boom and bust. This is motivated by the desire to secure future wealth through thrift. Pension plans, shareholding, investing in this and that. It always leads to a credit-driven disaster. Instead if house prices went down then you would have so much disposeable income that you could pay huge national insurance contributions which would support great pensions in the future (how this would be done I don't know exactly but your PRESENT contributions would be paying for TODAYS pensioners rather than tomorrows. If house prices stayed low then the same would apply when you were older. The average person would have so much disposeable income in comparison with now (i.e. no wasted money on mortgages and rents) that they would not mind paying higher taxes and could still have a great amount to blow on toys like electronic gadgets and all the other stuff people must have to keep them occupied/ display their status.

    Instead we have a completely inefficient system where we continually pay higher prices for the same thing over and over again - just like we did with the record industry.

    The vast majority of most peoples work time is spent paying for housing. For things that exist that don't need replacing. Just like we shouldn't have had to pay for music over and over again.

    Surely this is the epitomy of inefficiency?

  • Comment number 39.

    #38
    If house prices consistently went down, why would anyone buy one either to let or live in?
    The onlky way to bring prices down is to increase the supply or reduce the demand, just ask John_from_Hendon!

  • Comment number 40.

    Guy Hands is hunkering down in Guernsey, avoiding his bills. But he'll be stuck with this one, with any luck - break open the Chardonnay!

  • Comment number 41.

    @ 36. At 13:58pm on 02 Dec 2010, SoxSexSax wrote:

    > "The death of the music industry is not inevitable." - #34
    > I am a computer programmer, and I strongly disagree with the above.
    > In fact, I give it ten years, tops.
    > We'll see. :-)

    Yes - it's already dead - that's why the stuff on the radio is so rubbishy. British music is just as bad as European music nowadays (!) and that's saying something.

    In ten years, we're all hoping that banking and other informational industries will have suffered death by Internet too. DIY is best.

    Bankers are so thick, they still think it’s just a fad!

  • Comment number 42.

    ----------------------------
    SoxSexSax wrote..
    I am a computer programmer, and I strongly disagree with the above.
    ----------------------------

    It would help if you said why. I'm also a programmer and an engineer and I can think of loads of music formats that are vast improvements on mp3. The business model that music companies are following is barmy because they believe that it should be the responsibility of consumers to know whether music content is legal. Consumers don't have this responsibility in any other context. Their approach is damaging music.

    ----------------------------
    Jacques Cartier wrote..
    Yes - it's already dead - that's why the stuff on the radio is so rubbishy. British music is just as bad as European music nowadays (!) and that's saying something.
    ----------------------------

    Music is going to change radically but people won't be able to make any money if they follow a nonsensical business model. You may believe that nothing new happens in music but Ray Tomes's harmonic theory is a new and I believe fundamental music theory. It allows new musical avenues to be explored but as yet it's not being used in popular music. Music will change beyond recognition in the next 100 years.

  • Comment number 43.

    All this user's posts have been removed.Why?

  • Comment number 44.

    39. At 15:36pm on 02 Dec 2010, AnotherEngineer wrote:

    Because we have to live somewhere...
    If all house prices went down then the cost of replacing your current house would be the same. If you moved into a bigger house it would still take proportionally less of your income to buy one. Even house price stability would make more sense.
    The housing bubble was a disaster for several econonmies and for all the gains in property prices there is a consequent loss - (higher taxes, bank bail outs, credit crunch). The entire economy is paying and peoples equity is currently trapped. Thats an awful lot of peoples work-time trapped in property.
    It takes most people 20-25 years to pay off a mortgage. If house prices went down to nearer their cost level then most people would spend an awful lot less time slaving away for something that in true terms isn't worth nearly so much as its market valuation. If the average UK house price was £50k right now then your mortgage would be more like 6-7 years. This would free up at least 13 years worth of your income and make it disposeable. Thats a lot of fun to be had, a boost to the productive economy and a lot less worry about pensions. Instead we a potentially facing higher taxes for the forseeable future and a flat economy.

    Car prices go down, but we still buy those. In some places the price of a 4x4 isnt that much less than that of a house! The key is not to see the house as an investment vehicle but as a product just like anything else. Even if you have benefited from a gain in house prices - how are you going to cash in on that gain? Sell up? Then your paying rent which is more expensive than a mortgage.

    Of course you could also buy several houses and create an artificial housing shortgage and increased house prices (and where does that lead I wonder) and force people to rent by locking them out of the market. Property prices potentially go up endlessly. £1 million for a terraced house? Ridiculous by any stretch of the imagination. A similar scenarion was posted here by RP a few weeks back citing how entire communities in China were empty because second homes had been bought as investments and the owners didn't want to move in in case the house was then declared second hand. Meanwhile large parts of that nation will be living in shanty towns. Crazy.

    The key is to compare the cost of buliding a new house to the cost of buying a new house. Bricks are very cheap indeed.

    A so called first world nation which spends on average 1/3 of its work time paying for buildings is wasting its time and resources.

    If there is a need for more houses then so be it. I doubt it though - there are thousands of empty houses out there. We are trapped in a situation where if we do build more houses then everyone who has invested in property will lose out. So what are we to do? Carry on living with an artificial shortage of houses so as to protect the market. Isn't that like the actions of a cartel. The country has tied itself up in a knot. And house prices need to continually rise otherwise your investment property will yield very little in 25 years time.

    PS haven't been posting long enough to know what John from Hendon thinks!

  • Comment number 45.

    Like many contributors, I am also hoping this will be the demise of a private equity firm. They are financial rapists.

  • Comment number 46.

    GUY Hands’ private equity group Terra Firma maintains that it is still going to put up a fight. Hands has lost a $2bn (£1.25bn) in his FRAUD case against his bank Citigroup. Hands isn't ready to cut & run.
    The problem: EMI has a £3bn debt pile, the bulk of which is held by Citigroup.
    Citigroup could seize control of the firm if EMI breaches banking "covenants". (Debt covenants, also called banking covenants or financial covenants are agreements between a company and its creditors that the company must operate within certain limits. Debt covenants are agreed as a condition of borrowing. They may be changed if debt is restructured. A company may well be forced to sell assets in order to stay within a debt covenant. In theory, breach of a debt covenant usually allows creditors to demand immediate repayment. A breach of covenants therefore usually leads to a renegotiation of the terms of debt. The debt is likely to be re-negotiated on worse terms as a quid pro quo for not demanding immediate repayment.)
    Citbanki could insist on a debt-for-equity swap for a majority stake in the firm if Hands fails his debt covenents.
    Terra Firma, which has reserved its right to appeal against the New York court’s ruling last week, has until March next year to meet the next round of debt deadlines. If Terra Firma does appeal, things could stretch even longer. (A US jury rejected the fraud case against Citigroup Inc brought by Hands over his 4 billion pounds ($6.5 billion) purchase of the EMI music company in 2007. The decision in the US District Court in Manhattan could force Hands' private equity firm, Terra Firma, to relinquish EMI to Citigroup, the main creditor bank that provided 2.6 billion pounds ($4.2 billion) in loans for the acquisition. The jury heard Hands' word against the word of his onetime Citigroup banker friend David Wormsley, 50, whom Hands, 51, accused of lying about a rival bid for EMI in May 2007 that turned out to be false. EMI has struggled under the weight of its debt, and this deal is a perfect example of the excesses of the credit boom in the high-stakes world of leveraged buyouts.)
    Hands stillmaintains that he will fight for better terms on the debt pile, though he has already asked Citi for more generous repayment conditions. Yoc can bet against that happening!
    Hands in court: “If you accuse someone of fraud, it’s really game over. In terms of refinancing negotiations it’s like putting a stick into a dragon.”
    If Citibank does take over the music label, rivals like Warner Music Group are ready and waiting in the wings.
    I think it's pretty well over: the investment bank "too big to fail" will win.

  • Comment number 47.

    >44. At 11:56am on 03 Dec 2010, i wrote:


    A lot of common sense!


    I agree, and have done since I could understand the concept of depreciation as a child!

    This crazy idea that a house that has been lived in for decades should never sell for less real term value than it was bought for is utterly insane, and is not endorsed by many of the people of the world. Dare I say the majority of the people on the planet?

    China don't, there's a billion. Nor does most of India and the asian subcontinent (in the geological meaning for the overly PC) as far as I can tell, so another billion and quarter.
    Quite a lot of Europe are no where near as into home ownership as us, so we're edging on half the population already. I haven't looked up the rest of Asia, Africa or South America.
    We could be looking at up to 5 out of 6 people, not including dissenters to the national norms, broadly agreeing with people like 'i' and myself on this matter.

    So is this purely an economic disease of the English speaking world?

  • Comment number 48.

    44. At 11:56am on 03 Dec 2010, i wrote:

    I think you are taking a very simplistic view. If house prices start to fall as soon as the house is bought you will have the situation where the first houses built on a large estate will be worth a lot less than the last ones built several years later. What about when someone spends a lot of money renovating an old house? I do not think that the car analogy is valid: a car only lasts about ten years whereas a house lasts for centuries in some cases (although not most of the ones being built now).
    In any case, this is not really worth arguing about; house prices are decided by supply and demand, unless you are proposing that the government should control prices. You mention John_from_Hendon; he denies that prices are fixed by supply and demand and would probably approve of government control.

  • Comment number 49.

    42. At 18:17pm on 02 Dec 2010, Hacky The Hufrex wrote:

    > Music will change beyond recognition in the next 100 years.

    It's already changed beyond recognition in the last 25 years. It's turned into
    total rubbish.

  • Comment number 50.

    #48. AnotherEngineer wrote:

    #44. i wrote:

    "You mention John_from_Hendon; he denies that prices are fixed by supply and demand and would probably approve of government control."

    Taking my name in vain I read....

    My analytically concluded view based on the facts is that house prices in the UK are governed almost entirely by the cost of borrowing and as the market is saturated there is no input from supply or demand. The more the banks lend the higher the prices - that is to overriding influence on the 'market'. The Bank of England and the FSA know this and they have at last 'fessed up' (to use their own expression, which I dislike) to gross mismanagement of the supply of borrowing via the complete mispricing/underpricing of money for the last decade or so.

    This underpricing caused the credit bubble which will now be unwound over the next decades (if they have their way) or more rapidly if I get mine. Their pace of unwinding will cripple the economy for a generation - mine will get the correction over rapidly. I liken their way as slow starvation over decades and mine as going without food for a day or so. I know which a rational person would choose! But unfortunately our regulators are the most stupid and economically ill educated bunch of idiots it would be conceivably possible to select!

    By the way government does fix the prices in one sense via the Bank of England for which the govenrment sets the rules via the Bank of England Act as this sets the rules of monetary (mis!) management! The govenrment should have understood what it was doing, and I maintain that it wilfully created the bubble economy which led to the crash because even I (who am extremely censorious about the ignorance and stupidity of regulators) cannot believe that they did not do so deliberately.

    Further if they(see above) did not understand that their policies were certainly going to create a bubble they should have done so, and we have every right to expect that these people who hold themselves out to be capable of intelligently managing the economy ought to have known what they were doing. I know that they knew as I (and I am sure many others) warned of the inevitable consequence of policy on several occasions during the last decade and earlier and did so in writing directly to both the Bank of England and the Treasury. Hence my very firm view that the guilty men must go!

  • Comment number 51.

    Well Guy Hands probably deserves this. It just shows the effect of Hubris on former star bankers.

    CITI will then hopefully put EMI as a business out of its misery under Terra Firma.

  • Comment number 52.

    If a species fails to adapt to a changing environment then it will inevitably die.

    So long EMI.

    BTW, you fleeced me for years so I won't be shedding any tears.

 

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