According to the Financial Times, Citigroup tried to take control of EMI before Terra Firma launched a legal action against the bank.

The paper reports that in September Citigroup proposed a debt-for-equity swap that would have given the bank a majority of EMI's equity and given Terra Firma a share in the upside from restructuring the company. Another source told the FT that the proposal offered Terra Firma a management fee.

Terra Firma rejected the proposal, which offered little financial detail, according to the FT. Citigroup then rejected an offer from Terra Firma to put £1 billion ($1.6 billion) of new equity into EMI in exchange writing off the same amount of debt.

The next covenant test for EMI falls due at the end of this month.

In its legal action in New York this month, Terra Firma alleges that Citiqroup misled the firm about other bidders' still being in the running for EMI.