Peter Kafka

Recent Posts by Peter Kafka

Saved! Terra Firma Keeps EMI Out of Citigroup’s Grasp (For Now).

Terra Firma, which made a disastrous bet on EMI Music a few years ago, gets a bit more time to try to salvage things.

Guy Hands’s private equity group has rounded up another $150 million from investors, which will allow it to avoid a looming default on debt held by Citigroup (C), the Wall Street Journal reports:

Mr. Hands’ success in tapping his investors hands him a victory in the latest round of his epic battle with Citi, which lent him the money to fund the leveraged buyout in 2007. With syndication markets closed as a result of the financial crisis, Citigroup was stuck holding more than £3 billion of EMI debt. The two sides have been unable to agree to a restructuring of the business, setting up a high stakes game of chicken.

The cash buys Mr. Hands nearly a year, to the end of next March, to execute on a turnaround plan for EMI, which has been buffeted by a shift in demand for music away from CD sales and the crippling debt the buyout saddled it with. Amid the problems, it has seen a number of big name artists flee the label, including Radiohead and Paul McCartney.

Bigger question: Does it really matter if one of the big music labels is owned by a private equity group instead of a bank? Maybe not. There’s still a good chance that EMI will end up getting broken into parts and sold off to rivals like Sony (SNE) and Warner Music Group (WMG).

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work