Judge Jed Rakoff, who is presiding over the case, told lawyers for both sides that he wouldn’t allow a Terra Firma witness to testify that the private equity firm had lost €6.09bn (£5.3bn) in profits as a result of the EMI deal. An alternative theory, which said Hands should be compensated for being ‘locked in’ to the deal even as EMI’s value was dropping, was withdrawn by Hands’ lawyers.
Hands is seeking compensation for Terra Firma after he claimed that he was tricked into paying over the odds for EMI by former friend (and Citigroup stalwart) David ‘the Worm’ Wormsley, who allegedly told him rival group Cerberus was poised to make an offer for the record label. According to Hands, Wormsley told him Cerberus was lining up to make an offer of ‘262 or 263p’ per share, causing Hands to jump in and pay 265p – which valued EMI at £4.2bn. To make the acquisition, Terra Firma was forced to borrow £2.6bn from Citigroup, a debt it has since been struggling to repay.
Conspiracy theorists are keen to point out that if Hands does win the case against Citigroup, that would bring a swift end to the debt restructuring negotiations between the two sides, allowing Hands to use his damages to pay off the bank, and leaving him free to sell EMI for a profit – which, despite its debts, is actually doing rather well at operating level. If the two sides can’t reach an agreement, though, it could give Citigroup free rein to take control and sell it on to a buyer or, worse, put it into administration.
No doubt, the words of that well-known economist, Lily Allen, will be echoing through Hands’ mind as he steps into the dock next week: ‘I hate Terra Firma,’ she told The Word magazine a while ago. ‘They’re w*****s and they don’t know what they are doing. They will fail.’