EMI faces tough times with bank

"EMI faces being taken over by its bankers after breaching its debt covenants following its failure to clinch a deal with rival Universal to sell its distribution rights in North America for around £200m.[EMI has also been rumoured to be in talks with other major labels trying to license its catalogue for some immediate cash].

An agreement was viewed as critical if the British-based music company, owned by private equity firm Terra Firma, was to avoid breaching the terms of its debts following a £4.2bn buyout in 2007. Terra Firma, headed by British financier Guy Hands, owes £3bn to Citigroup linked to the transaction, which was clinched on the eve of the credit crunch.

Now Terra Firma must go to its investors in a bid to raise £120m by 12 June or face the prospect of Citigroup seizing control of the business. In normal circumstances, Citigroup could take over EMI now, but under the terms of its so-called "covenant lite" lending agreement, the bank agreed to allow the music company breathing space to make good any breach." From the Guardian

EMI's owners, Terra Firma, face debt that "now stands at more than £3 billion, compared to the £2.4 billion purchase price." From Hits Daily Double.