EMI, whose artists include Coldplay, Queen and Pink Floyd was made to look like a very expensive purchase when the downturn hit. And Terra Firma boss, Guy Hands, has had his fair share of problems with the record label – exiting artists, massive financial losses and litigation to name a few. At one point even his offshore tax status was nearly put at risk.

The biggest problem Terra Firma currently faces is keeping the firm’s lender from seizing EMI due to breaches of lending covenants. But a solution in the form of a very juicy looking carrot may be in hand:

Bloomberg: Guy Hands’s Terra Firma Capital Partners Ltd. is telling investors they could earn a rate of return of as much as 58 percent if they provide cash needed to keep lenders from seizing control of EMI Group Ltd.

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Terra Firma is seeking an initial 105 million pounds from investors to help EMI meet debt covenants through March 2011, according to the presentation. The private equity firm is also seeking guidance from investors whether they would be willing to invest an additional 255 million pounds to ensure EMI stays compliant through 2015, when its loans end. Terra Firma said it would be willing to contribute 55 million pounds.

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Will investors bite?