Guy Hands, the British financier and founder of the private equity firm Terra Firma, admits to having his hands full with the turnaround of EMI (the music giant). Having made his fortune in real estate deals across the UK and German and coming from a polished Oxford-educated background, his ideals tend to clash with those in the music business, but business is business and Mr. Hands appears to be resolute in his mission to make his leveraged buyout of EMI, in cooperation with Citigroup, a success.
What I found interesting about this article was Mr. Hands' description of the relationship with Citigroup and how that plays into the future of EMI. "...it's a partnership..." he says; Citigroup has not been able to syndicate the debt used to buy EMI and consequently has to ride-out the rough times experienced by EMI all by its lonesome. Mr Hands adds that he has been working closely with the bank to try and syndicate the loan both to reduce the risk to Citigroup as well as loosen its leverage over EMI.
EMI's business has suffered a great deal over the past decade and Mr. Hands' purchase only helped to reveal how bad it had actually been. From reporting old music (like that of the Beatles) as new music sales, it was successful in hiding its mounting losses in new music business and this is weighing heavily on the shoulders of Terra Firma investors. Mr. Hands purchased the business for its cash flows from old music and those, apparently, are fabulous; unfortunately, its new music business is pulling everything else down.
The music business as a whole is in a tough position with digital music sales from Apple's music store surpassing all others and online music exchanges through illegal file-sharing sites continuing to growth (albeit at slower rates). Mr. Hand, and Terra Firma, has proven his ability to make profits for his investors in the past, but he certainly has his hands full with this project and it will be interesting to see how he pulls this rabbit out of his hat.
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