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Citigroup says it will keep EMI 'business as usual' after surprise takeover

February 1, 2011 |  2:32 pm

EMI Group hopes to keep humming along "business as usual" following the company's surprise takeover Monday by its largest creditor, Citigroup.

Many had expected the bank, which in 2007 lent $5.4 billion to private equity firm Terra Firma to buy EMI, to wait until Terra Firma defaulted on its loan before wresting control of the British record company.

Citigroup's financial jujitsu, however, gave Terra Firma no chance to counter. It also short-circuited a potentially lengthy bankruptcy process triggered by a default on the loan. Instead, the move gave Citigroup absolute control of EMI, literally overnight.

In a debt-for-equity swap executed Monday and announced Tuesday, Citigroup wrote off 65% of EMI's debt in exchange for full ownership of the London-based music company. EMI, though operationally profitable, was able to pay the interest on its loan but struggled to make a dent in the principal. The deal leaves EMI with a little more than $1.9 billion in debt.

Citigroup signaled that it would not interfere with EMI's operations, which generated $2.64 billion in revenue in its last fiscal year, ended March 31. It posted a $534.9-million profit before interest, taxes, depreciation and amortization, up from $469 million a year earlier.

"It is business as usual for everyone at EMI," said Stephen Volk, Citigroup's vice chairman and the new chairman of EMI's new holding company, Maltby Acquisitions.

Citigroup also appeared in no hurry to sell EMI, which generated $400 million in operating cash flow its last fiscal year.

-- Alex Pham