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Artists contracted to EMI, or one of its multitudinous subsidiaries, will no doubt be extremely unhappy, today.

They’ll include Lily Allen, the chanteuse of doom; Elton John; Elvis Costello; George Michael; Kylie Minogue; Robbie Williams; and so on.

Citigroup Inc has already turned down Terra Firma Capital Partners’ bid to have EMI Group debt by slashed by 40% in return for a 1 billion-pound ($1.7 billion) cash injection, said Bloomberg News yesterday.

Now, “Terra Firma, the private equity house run by Guy Hands, has written its investment in EMI down by 90 per cent as it offers to put another £1bn into the struggling music group to restructure its debt,” says the Financial Times.

“Mr Hands’ offer to inject more equity into the company in return for Citigroup writing off £1bn of its £2.6bn loan has been rejected by the American bank, leaving negotiations between them deadlocked,” it says, going on:

“The size of the writedown on Terra Firma’s £2.3bn investment in EMI illustrates that Mr Hands has already accepted his stake in the heavily indebted music company has little more than option value.”

Not only but also, “The UK-based private equity firm is withdrawing about 10 Terra Firma executives that run EMI on a day-to-day basis after concluding that it has little chance of making back most of its money on the investment without the restructuring, and that they may be able to generate more value at other portfolio companies, a source close to the buyout firm said,” says the Wall Street Journal.

So what does all this mean to EMI employees such as Allen and Williams?

“According to sources inside and outside EMI, musicians are concerned that the company doesn’t have the money to properly market their material — most of the cash flow EMI generates is being used to service $4 billion in debt held by Citigroup,” says the New York Post, continuing:

“They have to rebuild credibility with the artist and management community about how well financed they are,” said one source at the label. “To the extent that they can’t put money behind records, that makes new signings all the more difficult.”

Another “red flag for artists is the high executive turnover rate at EMI, says the story, adding:

“Guy Hands, the CEO of Terra Firma, has replaced 80 of EMI’s top 100 executives since taking over the label in 2007. Terra Firma itself at one point had as many as 40 executives at EMI, though that number is now down to 10.

“Indeed, as music industry outsiders, Hands and EMI boss Elio Leoni-Sceti are seen as liabilities themselves. Leoni-Sceti was most recently a marketing executive with consumer giant Reckitt Benckiser.

“ ‘They have no leverage with artists because they aren’t investing in artists and repertoire, they have no management to develop artists, and [Guy and Elio] have no relationships in the music community to build off of,’ said one source close to EMI.”

Meanwhile, Warner Music boss Edgar Bronfman jr Edgar is moving to London, said p2pnet in June.

“Is he perhaps seeking a peerage as did another Canadian, Conrad Black? Sir Edgar Bronfman?” – we wondered, continuing:

“Stranger things have happened — but No. It’s  in all likelihood something far more prosaic. Bidnes.

Warner and EMI dropped efforts to merge in 2000, ‘after regulators opposed the plan,’ said Bloomberg News, in 2007, going on, “EMI again failed to combine with Warner in 2003, when a group led by Bronfman won the bidding for Time Warner Inc.’s music unit.”

But now … ?

Stay tuned.