2 February 2011
US banking group Citigroup has taken control of EMI, one of the world's largest record labels. The bank had previously given a large loan to Guy Hands to buy the company in 2007. Hands was unable to repay his debts to Citigroup. Mark Gregory reports.
Click to hear the report:
EMI owns the rights to some of the world's best-known musicians, including the Beatles and the rock band Coldplay. The company was bought for $6.5 billion by a private equity group headed by one of London's most prominent financiers, Guy Hands, in 2007, shortly before the global financial crisis.
That valuation looked massively optimistic after the markets crashed and EMI's new owner was saddled with an unpayable legacy of debt. Citigroup, which bankrolled the deal, fought for repayment of loans.
The issue was the subject of a high-profile court case in London, which Guy Hands lost. He claimed Citigroup, his bankers, had duped him into paying too much for EMI by suggesting there was a rival bidder when there wasn't. EMI's business performance improved considerably under his ownership, but the debt burden was just too big.
It's unclear what will happen now Citigroup have taken control, but the move means a big chunk of EMI's debt has been erased leaving it financially stronger.
Mark Gregory, BBC News
Click to hear the vocabulary:
legal permissions to publish
- private equity group
group of business people which raises money among its members to buy another business or company
significant or well-known
judgement of how much something is worth
dropped suddenly and by a large amount
- saddled with
burdened or responsible for
funded or financially supported
famous or widely talked about
portion or amount