TERRA FIRMA SUES CITIGROUP

Sue the shit out of ‘em.

According to a Wall Street Journal report, the U.K. mogul’s Terra Firma Capitol Partners filed suit against Citigroup today, accusing the bank of fraud when it sold EMI Group to them in 2007.

The lawsuit, filed in N.Y. state court, accuses the lenders, who made $185 million for its services on the deal, according to the complaint, of driving up the price of EMI by claiming there was at least one other interested bidder.

The complaint goes on to accuse Citigroup—which is holding $4.2 billion of EMI debt—of purposely undermining Terra Firma’s ability to manage EMI because they wanted to take over the company and sell it to Warner Music.

That’s right, folks. We can’t make this stuff up.

The bank recently rejected Hands’ proposal to restructure the loan to the company, which Terra Firma paid £2.4 billion in 2007, by putting in another billion or so pounds of his own money.

Citigroup held an auction for EMI, and allegedly didn’t tell Terra Firma they were the only ones left in the bidding, and that one of their execs misrepresented that N.Y.-based Cereberus Capital Management was still interested, leading to Terra Firma making a binding bid, which they claim they never would have done as the only bidder.

Citigroup was acting both as an adviser to EMI, and as lenders, what's known on Wall Street as a "staple" financing.

“Citi lied to Terra Firma about the auction process," said Jonathan Sherman, an attorney at Boies Schiller & Flexner LLC, the law firm representing Terra Firma. "It was a busted auction with no other bidders, and when does a private equity house ever bid against itself? Never."

Terra Firma seeks to recover its roughly $3 billion in paper losses on the deal as well as punitive damages for Citi's "egregious wrongdoing."

In a letter to investors last month, Hands, who along with his partners personally invested $290 million in EMI, reportedly painted a grim outlook for the company, and was losing his confidence in a restructuring. "We are running out of time," he wrote.