By Elizabeth Rigby in London

Published: July 30 2007 04:52 | Last updated: July 30 2007 04:52

Terra Firma looks set this week finally to buy EMI after the buy-out fund secured a last-minute extension for its £2.4bn ($4.9bn) agreed deal from the UK Takeover Panel.

Guy Hands, founder of Terra Firma, now has until 1pm on Wednesday to secure acceptances from 90 per cent of the shareholders to close the 265p-a-share deal and secure guaranteed funding from Citigroup, the investment bank. The original deadline was 1pm on Sunday. On Friday evening, Terra Firma had the backing of 85 per cent of shareholders.

The extension comes after a tense week, with Terra Firma rushing to secure the acceptances. Shareholders had been sitting on the shares through the offer period because they thought Warner Music might make a counter-bid for the company. It was only ten days ago that the rival business confirmed it did not have such plans.

A person close to the companies said on Sunday Terra Firma was confident it would hit 90 per cent acceptance by Wednesday.

Rather than seeking the extension, Mr Hands could have asked Citigroup – which is advising Terra Firma and EMI on the deal – to waive the 90 per cent acceptance level required to guarantee the funding.

Investment banks typically will waive the 90 per cent formal requirement, but not until the closure of the deal. However, tightening credit markets have put banks under pressure not to take on more debt. A source close to Terra Firma said on Sunday that Mr Hands would not renegotiate the debt arrangements should it not reach the acceptance threshold.

However, abandoning Terra Firma and EMI would be “suicidal” for the bank’s relationship with two of its best UK clients, said another person close to the deal last week.

Even if the deal goes as planned, credit market conditions could force Terra Firma to pay more for the £3.5bn debt package while Citigroup could be left holding a larger chunk of the loan than it counted on.

Investment bankers said any hard line from Citigroup could merely be a tactic to secure better terms on the package it puts together to replace Terra Firma’s temporary financing.

Copyright The Financial Times Limited 2007