A settlement on the steps?

15 October 2010 By Una Galani Follow @ugalani

The U.S. bank faces a tough choice: submit to a public airing of allegations that it tricked Terra Firma into buying the music group, or restructure the 3 bln pound loan that funded the deal. A settlement would minimise Citi s blushes and help break the impasse over EMI.

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Terra Firma, the private equity group led by Guy Hands, is seeking damages of up to 7 billion pounds ($11.2 billion) from Citigroup over the fund's 2007 takeover of indebted music label EMI, according to several people familiar with the situation. The two sides are due to meet in a New York court on Oct. 18.

The U.S. bank vigorously denies the allegation that it encouraged Terra Firma to pay more for EMI by misleading the fund into believing that its U.S. rival Cerberus was still in the race.

The two sides have held discussions to try and settle a dispute over the private equity group's 4.2 billion pound acquisition but an agreement is yet to be reached.

Citi advised EMI on the deal and also provided Terra Firma with a 2.5 billion pound loan maturing in 2015. Due to currency fluctuations, the value of the loan, which is denominated in dollars, euros and yen, has risen to over 3 billion pounds.

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