Leoni-Sceti came to the company in July 2008, a move that raised plenty of eyebrows as he had zero experience in the music business. His background was marketing packaged goods like Woolite and French’s Mustard.

But in retrospect it doesn’t really matter who Terra Firma brought in to run the company; the investment group’s big mistake was paying too much for EMI, using too much debt, in 2007.

At this point, the real question for EMI isn’t who runs it, but who owns it. There’s a decent chance that Terra Firma will breach a banking covenant in coming months and that control of EMI will go to Citigroup (C), which owns most of the label’s debt.

The conventional wisdom is that part or all of  EMI will end up in the hands of longtime rival Warner Music Group (WMG) sooner or later.

Release:

CHARLES ALLEN BECOMES EXECUTIVE CHAIRMAN OF EMI MUSIC LONDON, 10 MARCH 2010 — EMI Music announces the appointment of Charles Allen as its Executive Chairman.

Charles has been non-executive Chairman of EMI Music since January 2009, chairing its Board and supporting the transformation of the business. Elio Leoni-Sceti, EMI Music’s Chief Executive, who has successfully led EMI Music through the first phase of its operational turnaround, will be leaving the company on March 31st 2010.

Over the past two and a half years, EMI Music has become a stronger and growing company, with a talented senior team, significant creative success and a more rigorous approach to marketing and operations. This has resulted in increased sales, improved market share and industry-leading EBITDA margins.

Charles said: “Elio has done a great job. I have thoroughly enjoyed working with him; he is a very talented executive and we all wish him well in the future. Our goals for EMI Music remain the same. I will support and guide the group’s strong team, keep EMI’s focus on creativity and superb A&R, and deliver a digital platform. This is a great business – our task is to ensure it has a great future.”

Elio added: “EMI is a wonderful business with a great team and new creative and operational momentum. My job here is now done and it is time for me to move on. It has been a pleasure to work with Charles and so many other talented and committed people. I look forward to seeing the company go on to further success in the future.”

Elio Leoni-Sceti, who heads up the EMI Music unit, explained the overhaul during a staff meeting in London today, and he’ll be embarking on a barnstorming tour to give the same speech at EMI outposts around the world.

But the more important message EMI delivered today was to the company’s investors, who have lent it some $5.8 billion: Don’t worry! We’ve got plenty of cash.

This is good to know, given that EMI has already disclosed that it racked up paper losses of more than $1 billion in 12 months. And there is persistent chatter that the company is strapped for cash and is having a difficult time making debt payments.

Not true, says Leoni-Sceti. “EMI is absolutely not bankrupt, far from it. EMI has never been in such a financially sound situation,” he told the FT. “Terra Firma is a solid financial owner and is committed to this company…and committed to putting in more equity if it is required.” [Emphasis added].

That last part is important, since it suggests that debt service could be an issue for the company–one that could force Terra Firma to inject more cash to keep it afloat. But the company also released a limited set of financials for the recorded music unit (that’s the really troubled part of EMI–its music publishing business is in decent shape), which paint a much rosier picture.

All sums converted from British pounds, for the six-month period ending Sept. 30:

• Revenues: $758 million, flat year-over-year
• Operating cash flow: $314 million
• EBITDA: $93 million

And while physical sales were down three percent (that’s not bad, considering the rest of the industry), digital revenues via outlets like Apple’s (AAPL) iTunes were up 37 percent, the company said.