HANDS' BUCKET SPRINGS
ANOTHER HOLE

Could Terra Firma’s defeat at the hands of Citigroup in a N.Y. District Court mean the end of EMI Music after 113 years?

Guy Hands’ Hail Mary pass to save the company, which is tying up, according to his testimony, between 60-70% of his wealth, turned out to be a dud after a jury cleared Citigroup of any wrongdoing in the sale of EMI.

Hands sought an $8 billion recovery, plus punitive damages. The jury awarded him nothing.

EMI and Hands are now running out of options. The company risks defaulting on its debt and could be forced to file for bankruptcy next year. In that case, Citigroup would take ownership of the company and likely look to break it up and sell off the pieces, which includes its desirable music publishing unit.

Citigroup’s lawyers depicted Hands having a bad case of buyer’s remorse, while the bank’s U.K. rep David Wormsley testified that he never lied to old pal.

“Rather than taking responsibility for making a mistake, he turned around and filed this lawsuit,” Citigroup attorney Ted Wells told the jury. “He made a bad business decision and is trying to shift responsibility to Citibank.”

Terra Firma is estimated to have lost about $2.5 billion on the investment. His investors are not happy that Hands allocated about one-third of the firm’s $7.7 billion pool to one failed investment.

“Guy Hands couldn’t fight technology,” said Wells in court on Wednesday. “No one’s buying records anymore.”

Ouch.

One of the outcomes of the trial is that Hands has now destroyed his relationship with Citigroup, which controls the company’s fate. “If you accuse someone of fraud, it’s really game over in terms of [refinancing] conversations,” he testified earlier in the trial. “It’s like putting a stick into a dragon.”

Perhaps the only one to emerge with a better reputation is Judge Jed S. Rakoff, who proved a lively jurist, adding jokes to the sometimes ponderous financial testimony.

At various points, he decried the Yankees playoff defeat, cited a lyric from the musical Oklahoma!, and described the case as a “cat fight between two rich companies.”

On Wednesday, he chided Wells for at one point referencing Colombo, Kojak and C.S.I. “What about Sherlock Holmes for old folks like me?” he asked.

Citigroup had significant exposure in refusing to settle and trying the case before a jury, realizing it wasn’t the most sympathetic defendant, but in the end, it didn’t matter.

“We should not have loaned [Hands] the money,” concluded Wells. “We have to live with our own bad business decision, and so does he.”