Terra Firma and EMI: 'New trial, new evidence'

Terra Firma returns to court today seeking damages of around £1.6bn from former banking partner Citi.

Terra Firma will return to court this morning as the firm seeks once again to win damages worth £1.6 billion ($2.3 billion; €2 billion) from Citi in connection with its lost investment in music group EMI.

The case starting today marks the second round of a battle between Guy Hands’ private equity firm and the New York-headquartered bank. Terra Firma, which claims Citi pushed it into buying EMI under false pretences in 2007, lost the first round – a court case which took place in New York in 2010 – but that verdict was overturned in 2013, opening the door to a retrial.

“This is a new trial, with new evidence and new allegations of fraud against Citi regarding the sale of EMI,” said Terra Firma in a prepared statement. “We look forward to an English court considering these serious claims under English law.”

Citi maintains the claims are “entirely without merit”. “Citi did not make any dishonest statements to Guy Hands or Terra Firma throughout the auction process for EMI and is confident the UK trial will confirm this,” the firm said.

The investment in EMI has proved a defining moment for Hands’ firm. The loss of the business saddled Terra Firma’s two most recent buyout funds with a combined equity loss of £1.58 billion and has prevented it from raising another blind pool buyout fund.

Win or lose, the case will mark the end of a chapter for Terra Firma, which has spent the intervening time establishing a viable model for making future investments and building a renewed team of investment and operations-focused professionals.

After a series of successful exits, the firm has more than €1 billion of its own capital to invest and “in recent years” has had investors’ pledge more than €2 billion to invest, Hands told Private Equity International in March.

From now on the firm will account for at least 10 percent of the equity for every deal done or fund raised, Hands has said.