British private equity firm Terra Firma Capital Partners Ltd is improving results at EMI, but said it might have paid too much money for the debt-laden home of the Beatles and Coldplay.

Chairman and chief investment officer Guy Hands said Terra Firma boosted earnings at EMI's recorded music division to about 160 million pounds ($263 million) last year from around $82 million when it was bought in 2007.

In a speech at a Dow Jones private equity conference on Thursday, he forecast that earnings this year at that division would be over $330 million.

Hands said talks with Citigroup Inc, the bank that holds EMI's debt, were ongoing in a gentlemanly and constructive way. He would not be drawn on the possible outcome of those talks.

Will we get to a solution that's a win-win for all stakeholders? he said. I don't know, but I certainly know there's desire from all parties to do it. Right now, the reality is we're improving the company as much as we can.

Terra Firma's struck its ill-fated $6.5 billion buyout of music business EMI at the height of the buyout boom.

The ailing music group accounted for the vast majority of Terra Firma's $1.96 billion writedowns this year and Terra Firma was forced to inject extra capital into EMI twice in just six months.

Citi is holding the debt package associated with the deal after an attempt to sell some on to secondary investors was thwarted by the credit crunch.

A source familiar with the negotiations said Terra Firma offered to inject $542 million in equity in return for the bank agreeing to a restructuring of the debt. But the more EMI's performance improves, the less urgent the restructuring is.

The debt is costing EMI 10 percent a year -- higher than the original expectation of 6 percent, the source said. That translates to about $493 million a year, which leaves Terra Firma little money left to grow the business.

Hands said in the speech that luck and timing were a good part of investing. The EMI deal was struck in May 2007, just before the credit crunch.

If the EMI auction started two weeks later, it wouldn't have occurred. We wouldn't have bought it. We'd have 90 percent of our funds still to invest and we'd look like geniuses, he said.

The EMI business is split into recorded music and publishing. Its recorded music business is where Terra Firma wants the debt reduction to take place.

Terra Firma invested $46 million in EMI in May, its second injection of capital in six months, to keep the company within the terms of its debt agreements.

While the financial performance of EMI's publishing business has been stable throughout the downturn, the recorded music division has seen much greater volatility. The debt burden is split roughly equally between the two divisions.

Restructuring talks have been going on for a number of months, with Blackstone Group LP advising Terra Firma.

Hands, previously chairman and chief executive officer of Terra Firma, relinquished day-to-day control of the firm in March to concentrate on investments and building relations with investors.