The accounts show that EMI Music will fall far short of critical covenants on its debt when these are tested between March and December this year and could suffer further shortfalls next year. The news sets the stage for a dramatic test of investors' faith in Mr Hands, who paid £4.2bn for EMI just before debt markets collapsed.

Terra Firma needs to raise the new funds to salvage the remainder of its equity in Maltby Capital, its acquisition vehicle for EMI, and avoid losing control of the company to its bank. The accounts are due to be published this week.

Approval
Terra Firma, which has already written to investors, will need approval from at least three-quarters of voting investors in its two most recent funds. It secured their conditional backing last year for an aborted proposal to put £1bn of new equity into EMI in return for Citigroup writing off £1bn of debt.

Mr Hands is already involved in a legal dispute with Citigroup, after filing a claim in New York late last year over the sale process of EMI.

Past shortfalls against covenant tests have been made up by injecting equity from a pot of money set aside for the purpose, but this has now been almost exhausted.

Mr Hands has asked Elio Leoni-Sceti, chief executive of EMI Music, for a new plan for the recorded music arm to persuade investors that he could invest the new funds for a good return, according to two people familiar with the company.

Terra Firma has written down its equity in EMI by 90 per cent, and this is likely to trigger a large headline loss for the year to March 2009.

Improvement
Deep cost-cutting and the stability of its music publishing business - which is not expected to breach its separate covenant tests - have driven significant improvements in EMI's operating performance.

Renewed chart successes have also helped, with four top 10 positions in the US this week for Lady Antebellum, Corinne Bailey Rae, Celtic Woman and a Grammy Awards compilation.

EMI last year made a net loss of about £1.5bn and earnings before interest, tax, depreciation and amortisation of £293m out of which it paid cash interest of £215m in the year to March 2009, according to details EMI released last year.

Terra Firma explored disposals from EMI, such as its Japanese and classical labels, but held off as no offers came in above the level required in Citigroup's covenants.