Terra Firma, who paid way over the odds for record company EMI in 2007 and are fighting moves by Citigroup’s Citibank to repossess it under terms of its debt; have been told by a US federal judge that they can take its bankers to court over their claims that they paid an inflated price for it.
While the purchase of EMI for a ludicrous £4 billion epitomised the 2007 – 8 debt bubble in the US, it’s led to an interesting reason for suing the company that it bought it from. Rather than just accepting that they were greedy suckers who thought they’d still make a decent profit out of a record company in this day and age, they’re now saying that that Citigroup bumped up the price of EMI Group Plc by not revealing that the only other sucker had withdrawn from the auction.
Many would say that Terra Firma and its boss Guy Hands failed to remember the ancient phrase of caveat emptor or buyer beware; but US federal court judge Jed Rakoff has agreed to let Terra Firma’s claims for fraudulent misrepresentation and fraudulent concealment go to a jury.
It’s worth noting that this is by no means a victory for EMI’s owner Terra Firma – the judge threw out two of their other claims. At the moment EMI can only just cover the interest payments on the massive £3 billion debt it owes to Citigroup.
