Citi sheds EMI’s £1.5bn pension fund

More than two years after seizing control of music group EMI, Citi has sold the company’s pension fund to Pension Insurance Corporation, marking the UK’s largest ever pension insurance buyout.

Citigroup has sold EMI Group’s pension fund to the UK’s Pension Insurance Corporation. 

The deal will see Pension Insurance Corporation take charge of nearly £1.5 billion (€1.7 billion, $2.3 billion) of liabilities and 20,000 members in what is the UK’s largest ever pension insurance buyout, according to a statement from Citi. The transaction will also free Citi from liabilities inherited from the music group’s £4.2 billion acquisition by Terra Firma Capital Partners, the buyout firm led by Guy Hands, after the bank took control of the troubled asset in February 2011. 

Citi agreed to take on EMI’s pension fund’s liabilities in November 2011, as it sought to facilitate a sale of the group to potential industry buyers. The drawn-out negotiations eventually led to a two-part agreement, which saw Vivendi Universal acquire EMI’s recorded music division and Sony take over the company’s publishing business. 

The deal comes as Citi awaits a second trial related to the EMI buyout, following allegations that it had duped Terra Firma to overpay for the business in 2007. The bank won the first case in 2010 when a court argued that the suit had been brought by Hands to try and recoup losses incurred by its ailing investment. 

But a New York appeal court overturned the verdict in May, ruling that the judge in the original trial, Jed Rakoff, had misinstructed the jury by shifting the burden of proof from the bank to Terra Firma. This represented a misinterpretation of English law, the court said, making it necessary to reopen the case.

Should no settlement between the parties be reached in the meantime, the retrial is set to begin on 6 October, a source close to the matter told Private Equity International