Hipgnosis Songs Fund’s board mentioned on Thursday it was launching a strategic evaluate of adjustments to its present administration staff and different choices that might maximize shareholder worth, as the corporate braces for a vital continuation vote subsequent week.
Hipgnosis Songs Fund’s (HSF) inventory value hit an all-time low earlier this week after scrapping its upcoming shareholder dividend due to an accounting error that resulted in a virtually $12-million downward revision of sure anticipated streaming royalties.
Shares within the firm, which owns the rights to songs carried out by Rihanna, Fleetwood Mac, The Pretenders and extra, fell by greater than 10% on the information, and investor confidence appeared shaky this week, because the the five-year-old music royalty fund prepares for a do-or-die continuation vote on Oct. 26.
“This decision follows extensive engagement over recent weeks with shareholders in light of the forthcoming continuation resolution,” the board mentioned in an announcement asserting the strategic evaluate. “These meetings highlighted a continued belief in the company’s portfolio and growth prospects … as well as the need for changes by the company in order to deliver value for shareholders.”
The board mentioned it explored terminating its contract with the fund’s funding advisor, Hipgnosis Song Management, run by HSF founder Merck Mercuriadis, however mentioned it concluded it isn’t in shareholders’ curiosity, “as it would be an event of default under the revolving credit facility” if the fund fired its funding advisor earlier than discovering a brand new one who was accredited by the HSF’s banks.
The board reiterated its suggestion that shareholders vote in favor of continuous the fund, saying it believes “it is in shareholders’ interest to have a strategic review with the widest array of options for the company to consider and to identify changes that will focus on recovering and delivering improved shareholder value.” The board went on to say it requested its funding advisor to take away a clause in its contract that provides the group overseen by Mercuriadis the fitting to purchase HSF’s portfolio if its advisory contract is terminated, however that request was declined.
The firm’s inventory rose about 2.33% to 74.70 British pence ($0.90) as of 10:22 in London.
Continuation votes are required for all publicly traded trusts listed on the London Stock Exchange to present traders of closed-end funds with an exit technique.
In addition to a thumbs up or down on continuation subsequent week, HSF traders can even be requested to vote on the sale of 29 catalogs from HSF’s portfolio–together with the works of Shakira, Barry Manilow and different much less well-known artists–to its privately held sister fund Hipgnosis Songs Capital, which is backed by Blackstone.
The board reiterated on Thursday its assist for the proposed sale, saying it might use the $440 million in proceeds to scale back the corporate’s debt and purchase again up to $180 million price of its personal inventory.
The fund’s board chairman Andrew Sutch introduced plans to step down final month, and the board mentioned it has employed an government search agency to search for his alternative.
The boad additionally mentioned it additionally has secured new phrases with lenders that put the corporate again in compliance with its fastened cost cowl ratio covenant. The firm risked breaching compliance with its lenders over the previous week after it was compelled to reduce expectations for income from the U.S. Copyright Royalty Board’s Phonorecords III (CRB III) to $9.9 million, from $21.7 million.
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