Terra Firma Hopes to Return Money to Investors

Private equity firm Terra Firma is hopeful that it will return all its investors’ money despite losing $2.75 billion on music group EMI, Reuters reported, citing a letter from the firm’s chairman, Guy Hands. Terra Firma bought EMI in 2007 for 4 billion pounds, but lost control of the company to Citigroup after EMI defaulted on debt. Citigroup had backed the buyout with 2.6 billion pounds of loans.

(Reuters) – Terra Firma is hopeful it can return investors all their money despite losing 1.7 billion pounds ($2.75 billion) on music group EMI, the private equity firm’s boss said on Tuesday.

Guy Hands, Terra Firma chairman, said in a quarterly letter to investors that returning all the money in its third fund would be not easy, but he was encouraged by prospects for other investments and potential acquisitions.

Terra Firma [TERA.UL] bought EMI in 2007 for 4 billion pounds, but in one of the most high-profile examples of a buyout firm losing a company to lenders, Citigroup (C.N) seized control of the business last month after EMI defaulted.

Terra Firm split the equity investment between its second and third private equity funds, while Citigroup backed the deal with 2.6 billion pounds of loans.

Terra Firma’s second buyout fund has returned investors 1.75 times what they put in, but the third fund has only returned 41 percent of the 5.4 billion euros ($7.37 billion) they pledged, Hands said in the letter.

Terra Firma has 2 billion euros left to invest from that fund and was a bidder for ENI’s (ENI.MI) gas pipelines across Europe, sources said.