Citigroup said it was not seeking buyers for EMI, whose owners Terra Firma are suing the U.S. bank for billions of dollars in damages relating to its 2007 buyout.

The statement came after the Observer newspaper reported on Sunday (Dec. 20) that Citi was lining up buyers for EMI, attempting to apply pressure on Terra Firma chairman Guy Hands.

"Citi is not currently seeking buyers for EMI and is not in talks with any prospective buyers at this time. Reports to the contrary are false. Citi holds EMI debt but does not own equity in EMI," Citigroup said in a statement.

Terra Firma, the British private equity group, filed court documents 10 days ago in New York accusing Citi, which financed the £4 billion ($6.5 billion) buyout, of fraud. Citi has said the lawsuit is "without merit.

Terra Firma would not comment.