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A Citi victory will mean the untenable status quo is maintained, with the bank taking control of the company if and when Terra defaults on a payment, an increasing likelihood as record sales continue to contract and the patience of Terra Firma investors wears ever thinner.
I.B. BAD ON WHAT'S AT STAKE IN
THE TRIAL OF THE CENTURY
Guy Hands Isn’t the Only One Who’s Sweating the Outcome of the Terra Firma-Citigroup Trial
All industry eyes are on the Terra Firma-Citigroup trial, whose outcome could determine the very existence of EMI. David Boies, representing Terra, is characterizing Citi as duplicitous and deeply conflicted, having advised both Terra and EMI on the pending deal, jacking up the sale price by duping Guy Hands into thinking there was another bid on the table from Cerberus and then gloating about it. Citi’s lawyer, Ted Wells, is trying to paint Hands as an arrogant megalomaniac with a selective memory who’s desperate to shift the blame to Citi’s David Wormsley, his longtime friend and colleague, for Hands’ own catastrophic misstep. One of Citi’s key witnesses is former EMI CEO Eric Nicoli, whom Hands forced out in August 2007, less than a month after the deal was finalized, taking the job himself (Nicoli’s testimony was videotaped). If Boies manages to convince Judge Jed Rakoff and the nine-member jury that Wormsley did indeed fraudulently deceive Hands about the existence of another bidder, causing him to lay down a grossly inflated $6.4 billion for EMI in 2007, Terra could be awarded north of $8 billion, instantly stabilizing the long-unsettled situation at EMI. A Citi victory will mean the untenable status quo is maintained, with the bank taking control of the company if and when Terra defaults on a payment, an increasing likelihood as record sales continue to contract and the patience of Terra Firma investors wears ever thinner. Already in place are so-called “wrappers,” which separate the balance sheets and respective values of the record company and EMI Music Publishing, imposed to protect the pubco’s value. These wrappers prohibit the merger of the two companies or the sale of either without Citi’s approval… Meanwhile, it’s business as (un)usual at EMI, as Roger Faxon treads water pending the disposition of the trial, knowing it would be foolish to make a major move until the outcome is known. But the EMI chief’s decision to elevate his trusted lieutenant Dan McCarroll to the top A&R post in North America is being extremely well-received internally. According to insiders, the engaging McCarroll has further enhanced the collegial feeling among the existing brain trust of Colin Finkelstein, Greg Thompson, Angelica Cob-Baehler and Dominic Pandiscia. (McCarroll reports to Faxon, while his fellow executives report to Finkelstein.) At the moment, Nick Gatfield hire Rob Stevenson is handling day-to-day A&R at Capitol/Virgin, and it now appears that McCarroll may want to keep him… Wonderers are wondering what changes in the corporate culture of Warner Bros. Records will be enacted by the new ruling triumvirate of Chairman Rob Cavallo and his Co-Presidents: Todd Moscowitz, whose numerous responsibilities now include overseeing promotion, and marketing specialist Livia Tortella. Further, exactly what is the strategy of Lyor Cohen, who is playing a hands-on role as he attempts to reinvigorate the storied label? Cavallo will do double duty, employing his skills as rock’s premier hitmaker for various bands on the WBR roster… Insiders dismiss the possibility of WMG making another move on EMI, because primary investor T.H. Lee Partners is said to have no interest in increasing its music business holdings. But there’s talk that Edgar Bronfman Jr. might attempt to round up some new partners in order to make another play on the prize he’s long coveted… Lots of interest in L.A. Reid’s next move, as speculators speculate about what his role may be in Lucian Grainge’s new world order. Reid is believed to have a lot of time remaining on his IDJ contract, and he’s reportedly still in the running for a judge’s chair on The X Factor, as well as an undetermined role on American Idol... Lips are flapping about last week’s assertion in the N.Y. Post that RCA/Jive topper Barry Weiss will leave if he doesn’t get the Sony Music chairmanship—and it’s thought to be unlikely that either Weiss or Rob Stringer will be chosen, though the new CEO will obviously want Weiss to stay on in his current role. There’s much conversation about Weiss taking a post in UMG’s East Coast operation, and about how big a post that may be... Sony/ATV chief Marty Bandier, reportedly another candidate for the Sony Music top slot, has consistently said he’s not interested. Has Bandier changed his mind? Meanwhile, talkers are talking about the existence of yet another candidate: a very high-profile individual whom many consider to be one of the most accomplished music executives of the last 20 years—whose selection would hit the business with the force of a 100-megaton bomb... Names in the Rumor Mill: Alain Levy, Jimmy Iovine, Irving Azoff, Clive Davis, Doug Morris and Mo Ostin.
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