Blackstone is advising its rival Terra Firma on a plan to issue high-yield bonds to repay Citigroupâ??s £2.6bn of loans to music group EMI, one of the US bankâ??s biggest single exposures.

The move would replace loans maturing in 2014 with longer-dated bonds with fewer covenants imposing strict conditions on performance and financing.

JPMorgan and Morgan Stanley are in talks with Terra Firma, which bought EMI for £4bn at the peak of the debt bubble in 2007, about underwriting the bond issue.