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I'm not a financial analyst, but... I think the fact that the Feds are propping up Citi is irrelevant here. Citi has loads of bad loans like EMI on their books: if they didn't, they wouldn't be in trouble. Most of them have to be written down to one extent or another: that is why they are bad loans.

What I see here is a game of chicken: Terra Firma is telling Citi to take a haircut of $500 million, or T.F. may be willing to let EMI fall bankrupt and then the whole Citi loan of 2.5 billion could be hit. The question is, what is the fallout for Terra Firma if they let EMI fail?

But, I am not a financial analyst.

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