Terra Firma chief Guy Hands has bought out three cash strapped investors in his private equity fund at a heavily discounted price rumored to be at or close to zero. The investors who sold are said to be two large institutions and a family-owned group that together have more than €5B ($5.75B USD) invested globally in private equity. The sale both underscores concerns about the huge debt incurred by the purchase of EMI, as well as, the current economic downturn.
Investors in private equity funds make binding commitments promising to provide the cash when the fund finds deals. If, for example, Terra Firma were forced to dump more cash into EMI, fund investors might be called on to contribute cash that they did not want to invest or even have. Hands' move is seen by some as a "cheeky" vote of confidence in his own investement strategy.
