Guy Hands Absorbs Cash-Strapped Investors, And Has To Put Up With Lily Allen’s Whining

Guy Hands, tufty private equity monger and karaoke fiend, has announced, as reported by the FT this morning, that he’s had to buy out some of the investors in his Terra Firma Capital Partners III fund, after ringing round all the investors to check up on their financial health and finding some of them weren’t very well.

Hands raised €5.4bn in 2007, for a fund designed to finance buyouts; investors commit to providing money to it when a buyout emerges. Obviously the world’s changed a bit since then, and some of those investing in the fund are now finding it hard to get the money together for their commitments. Hands suspected this might be the case, and asked all 170 investors in the fund if they were going to be able to pony up the dough – “two large institutions and one family-owned group” wanted rid of their obligations, and so Hands allowed Terra Firma, the fund manager, to buy out their investments, worth €25m in total.

Hands got the investments back for next to nothing, highlighting just how desperate the investors were to get rid of them in the current climate. But taking on the responsibility will increase Terra Firma’s indebtedness once the calls for funding come in – the money will have to come from the fund managers themselves, a rare and strange thing to happen.

It comes as Hands is gearing up to pay Citigroup a £32m quarterly loan payment, and spewing out cliched metaphors concerning his rather worrying portfolio of deals made at the top of the market. He’s noted that “the darkest time is before the dawn”, that he’s “getting out of both sides of the bed” (?), and has compared his pricey investments to ‘83 and ‘87 Bordeaux wines, a comparison that could only be understood by the most ridiculously wealthy people on the planet – at least Hands knows his audience.

His vanity project, EMI, has been getting a bit better as it catches up with digital – its losses narrowed from £324m to £155m over the last six months. Obviously piracy is the biggest drain on their profits, and their CEO Elio Leoni-Sceti yesterday blamed internet service providers for not doing enough to prevent illegal filesharing, with what is seemingly the Terra Firma stock-in-trade, weak metaphors: “Internet service providers play a significant role because they own the pipe…In England we know there is a lot of water and content filtering wastefully through the pipes across the country. The pipe owner has a responsibility to close the holes.”

The reining in of losses at EMI is probably mainly due to Viva La Vida and “I Kissed A Girl”, but clearly every little helps – Hands brought in a wave of cost-cutting measures that were sensible and extremely obvious, like not paying massive advances, not buying Chris Martin a Christmas present, and not spending £20,000 on candles. Cue a wave of brattish moaning from the likes of Lily Allen recently: “I know that twenty years ago I’d have been booked in at the Ritz with five grammes of cocaine on my table and ten bunches of flowers. Some new clothes. A chauffeur on twenty-four-hour call. Now I’m lucky to get an Oyster card…I read a piece with Miles – my record company boss – in Music Week the other day, talking about me as his thing for ‘Quarter Four’. It made me feel disgusting, like some cheap product.”

Guess what Lily? You are a product! Yes, they’re artists and they need nurture, but getting guys in from Reckitt Benckiser actually brings in a kind of artistic rigour to EMI – rather than swilling Veuve around and waiting for your muse to arrive, you’ve actually got to get to work and make some great songs that people want to buy. And with Hands having to bail out his investors, even Lily’s Oyster looks earmarked for cutbacks. No-one said it was easy, but no-one said it would be this hard, eh?

Posted by Ben Beaumont-Thomas in Hot Money | February 23, 2009 12:13PM |