Terra Firma's £1.7 billion (US $2.7 billion) loss on its investment in EMI could be a private equity record, according to research by Private Equity News and Dealogic reported in Financial News.
The article reads: "Forstmann Little wrote off $1.5 billion on US telecommunications company XO Communications in 2002, TPG Capital lost $1.35 billion on American bank Washington Mutual in 2008, and some property deals have generated bigger losses, but a number of long-serving buyout executives, all of whom asked not to be named but who have been working in the industry for over 20 years, said they could not think of a larger private equity loss than EMI."
Other private equity funds have taken big losses, for example Fortress Investments Group $5 billion in unrealized losses from 2005 to 2010. And there have been big losses in real estate: Capmark Financial Group's 2009 bankruptcy was expected to cost KKR, Five Mile Partners and Goldman Sachs $2.1 billion. Last year Morgan Stanley warned its $8.8 billion property fund could lose two-thirds of its value.
But Terra Firma's loss was neither an unrealized paper loss nor related to the collapse in the real estate market. The private equity firm has a realized loss of £1.7 billion (US $2.7 billion) related to its three-and-a-half year ownership of EMI. If it's not the biggest private equity loss of all time, it probably ranks high on the list.