Unlock the Editor’s Digest without spending a dime
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
Shareholders in Hipgnosis Songs Fund have overwhelmingly voted down the funding belief’s try and safe an extra five-year mandate, throwing the way forward for the troubled UK-listed music rights proprietor into query.
The vote towards the belief’s continuation at its annual common assembly on Thursday will imply that its board should now evaluate choices for its future with shareholders and put ahead proposals inside six months. Greater than 83 per cent of votes forged have been towards the continuation of the corporate.
Ought to no settlement with shareholders be reached — and if buyers insist — the belief might finally be wound down or bought.
Traders additionally voted towards a deal to promote a $440mn music rights portfolio to a sister fund run and backed by personal fairness agency Blackstone. The deal was proposed by the board final month to attempt to pay down debt and slender the huge low cost to its internet asset worth that the funding belief has been buying and selling at.
A protest vote was additionally lodged towards the reappointment of Andrew Sutch, chair of Hipgnosis, who has already stated that he would step down from the board.
“Shareholders have spoken and despatched a transparent message that the established order is unacceptable and {that a} complete reset is required,” stated Tom Treanor, government director at Asset Worth Traders.
“We stay up for a refreshed board working carefully with shareholders to show the corporate round.”
Sylvia Coleman, senior impartial director of Hipgnosis Songs Fund, stated: “Whereas shareholders haven’t supported our proposed transaction or the continuation vote, it’s clear that they share our perception within the inherent high quality and potential of those property. The administrators at the moment are expediting the appointment of a brand new chair who will drive the strategic evaluate.”
The vote is a second within the five-year rollercoaster for buyers within the firm, which owns tune rights for artists similar to Justin Bieber and Neil Younger, in addition to the fortunes for music rights as a mainstream asset class.
Hipgnosis was on the vanguard of firms looking for to purchase music rights when it was based in 2018 by Merck Mercuriadis, a former supervisor of stars together with Beyoncé, providing buyers the prospect to revenue from the rise in streaming revenues.
The marketplace for music rights initially boomed, forcing the corporate to boost more cash and pay ever larger costs because it added to its portfolio. Hipgnosis raised greater than £1bn from buyers in complete, together with the Church of England.
However buyers have grown more and more cautious as larger rates of interest have pressured up the low cost charge used to calculate asset values into the longer term — reducing the worth of tune rights and making them much less engaging in comparison with asset lessons similar to authorities bonds.
The corporate has additionally run out of cash to purchase new rights, and its excessive ranges of debt and the massive low cost to NAV has meant that it has been unable to boost new money.
Hipgnosis shocked buyers this month by unexpectedly pulling cost of its interim dividend after warning that its debt covenants would have been in danger from a change in royalty funds to songwriters within the US.
Traders have additionally questioned the connection with Blackstone, which each co-owns the administration firm for Hipgnosis in addition to a rival fund that’s nonetheless shopping for tune rights.
Traders on Thursday voted down a deal to promote a big portfolio of its rights to the Blackstone fund, with a number of shareholders telling the Monetary Instances that the value agreed was far too low.
On Wednesday night time, the corporate stated board administrators Andrew Wilkinson and Paul Burger had resigned, that means that they’ve averted the potential embarrassment of being voted down on the AGM.
