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Citibank getting tough with its debtors – what does that mean for EMI?
By CMU Editorial | Published on Tuesday 29 September 2009
The New York Post has been speculating what Citigroup’s apparent mission to rid itself of dodgy debtors might mean for one of its biggest borrowers, EMI.
The Post notes that the struggling US bank has been getting rather tetchy about problematic debt payers of late, even going as far, they claim, as to push German fashion designers Escada into bankruptcy last month, while talking tough with another fashion house, Valentino. The Post claims that Citi is so keen to get troubled loans off its balance sheet that it is considering forcing companies to wind up even when there may be backers on the sideline willing to step in and help refinance.
All of this is relevant to EMI because, as much previously reported, Citibank provided a lot of the funding that enabled Terra Firma’s ambitious takeover of the London-based major in 2007. The music firm has considerable debt commitments to the bank which Terra Firma has been busy trying to renegotiate in recent months, so far without success. In much the same way Terra Firma boss Guy Hands recently admitted he would never have bought EMI had he known the credit crunch was looming in summer 2007, I think it’s fair to say Citibank would never got involved had they realised they wouldn’t be able to sell at least some of the EMI loan on to other lenders (there being no takers for such deals in a recession).
The Post has no evidence to suggest Citibank has decided that, if push comes to shove, it can afford to let EMI collapse, and insiders at the major and its private equity owners recently insisted that the music firm’s fortunes have improved sufficiently in the last six months that it is no longer so reliant on renegotiating its Citibank deals to ensure near-term survival.
But I think the paper’s point is that, with some in the banking sector looking to cut their losses as they attempt some sort of recovery from recent woes, it’s not a good time to owe one institution such large sums of money. And while this month’s Beatles boom and any possible Robbie revenues may give the major some breathing space, those debt commitments, to an antsy bank that’s demonstrated its willingness to press the self-destruct button when necessary, means question marks will remain over EMI’s long term future for sometime to come.
