Lex

Lex: Terra Firma/EMI

Guy Hands will have to ask investors in his Terra Firma private equity group to inject about another £100m after admitting that EMI's recorded music business will not be able to meet the terms of its loans from Citigroup this year, according to people familiar with its accounts. The accounts show that EMI Music will fall far short of critical covenants on its debt when these are tested between March and December this year and could suffer further shortfalls next year. The news sets the stage for a dramatic test of investors' faith in Mr Hands, who paid £4.2bn for EMI just before debt markets collapsed. Terra Firma needs to raise the new funds to salvage the remainder of its equity in Maltby Capital, its acquisition vehicle for EMI, and avoid losing control of the company to its bank. The accounts are due to be published this week. Luke Templeman analyses the latest news.