Is EMI In Deep Financial Trouble?
- FACT: CitiBank holds the bulk of EMI's £2.5BN debt
- FACT: EMI owner Terra Firma wants a $500 million write-off from Citi before it pumps another £300 million in much needed cash into the label group.
- FACT: With quarterly reports due soon, Citi is expected to show itself to be in the weakest position of all major banks causing tighter scrutiny by regulators.
Can a troubled bank under tight federal control (the U.S. government already owns more than 30%) just write of $500 million? Can it afford not to?
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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.