The buyout of EMI could become the latest victim of the turbulence in the debt markets, as lenders to its private equity buyers threaten to pull funding of the £2.4 billion acquisition.

It is understood that Citigroup, which is financing the acquisition of EMI by Guy Hands’s Terra Firma, has not given its approval to extend a key deadline for shareholders to vote on the deal.

So far, Mr Hands has secured the backing of 26 per cent of EMI’s shareholders for his takeover of the troubled British music group. He now has until 1pm on Sunday to secure up to 90 per cent of shareholders.

Sources said that if Mr Hands fails to reach the 90 per cent threshold, he plans to extend the deadline to allow investors more time to vote on the deal. However, he will need Citigroup’s approval to do that, and as of last night Citigroup had not given it.

“They were quite happy to lend it a couple of months ago, but now the market conditions have changed,” a source said. “If we don’t get it, there is a good chance the deal will collapse.”

If the deal collapses, it will be a huge blow to EMI’s embattled chairman, Eric Nicoli, who has been at the helm for seven successive failed merger and takeover attempts since 2000, when the group announced £5.5 billion merger plans with Warner Music.

Since then the group’s fortunes have gone into decline, as a result of the explosion of digital music, and Mr Nicoli has desperately tried to devise a rescue strategy. The agreed 265p-a-share deal with Terra Firma was announced in May this year.

Citigroup’s reluctance to extend the deadline for financing is the latest evidence of turmoil in the debt markets following the collapse of the sub-prime mortgage market in America.

In recent weeks, jitters over sub-prime have spread to the leveraged finace market, causing dozens of deals to be delayed or cancelled altogether as investors lose their appetite for risk.

In Europe, the £9 billion debt syndication backing KKR’s acquisition of Alliance Boots has run into problems, forcing the lead banks on the sale to restructure the package in order to get investors on board.

The sheer backlog of deals underwritten and waiting to be syndicated — about $250 billion (£121 billion) in America alone — has prompted several banks, including Citigroup, JPMorgan and Deutsche Bank to refuse to lend any more money to private equity until they have cleared their books of previous financing commitments.

One option would be for Citigroup to agree to waive the deadline but to charge Terra Firma a higher rate of interest on the debt package. That would be an unusual move, however, given that the bank has already agreed the terms of the loans with Mr Hands, sources said.

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