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Last updated at 18:04 GMT, Wednesday, 02 February 2011

Citigroup takes over EMI

Summary

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.

Reporter:
Mark Gregory

EMI building in London

A lot of EMI's debt has been erased as a result of the takeover

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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

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Vocabulary

rights

legal permissions to publish

private equity group

group of business people which raises money among its members to buy another business or company

prominent

significant or well-known

valuation

judgement of how much something is worth

crashed

dropped suddenly and by a large amount

saddled with

burdened or responsible for

bankrolled

funded or financially supported

high-profile

famous or widely talked about

duped

tricked

chunk

portion or amount