Hipgnosis sells 20,000 songs at discount for $23.1m to raise cash

Troubled music rights investor Hipgnosis Songs Fund on Monday said it had sold around 20,000 songs for $23.1m, a 14.2% discount to valuation at the end of September in order to raise cash to pay down debt.

The "non-core" songs require-time intensive ongoing accounting and reporting obligations and do not all have perpetual ownership rights,” the company said in a statement, adding that the sale represents about 1% of the company's investment portfolio by value.

Net proceeds after costs are expected to be around $22.6m, and will be used to pay down debt “providing the company with greater headroom under its future covenant compliance reporting”.

The company also announced the appointment of Singer Capital Markets as sole corporate broker and financial adviser and Shot Tower Capital, LLC as lead adviser to conduct due diligence on the firm's assets as part of its strategic review.

Hipgnosis was founded by former band manager Merck Mercuriadis in 2018 and spent millions buying up music rights from major artists such as Neil Young to provide income for investors, but the asset class has fallen out of favour amid a higher interest rate environment.

The company in October cancelled dividend payments to shareholders, saying that changes to US royalties had reduced its income. It said that paying a dividend would force it to breach its covenants, agreements with lenders.

Last month Hipgnosis Songs Fund confirmed it was facing legal action, with Hipgnosis Music Limited - which has been in liquidation since 2018 - serving proceedings against the company, its investment advisor and Mercuriadis.

Mercuriadis, the founder of HSF, runs the firm’s investment advisor, Hipgnosis Song Management. He was also previously a director of Hipgnosis Music Limited.

HSF said Hipgnosis Music Limited alleged a "diversion of business opportunity" from Hipgnosis Music Limited to HSF and Hipgnosis Song Management.

It also claims that HSF "unlawfully assisted Mr Mercuriadis with, or received, this alleged diversion". HSF denied the claims and said it would "vigorously" defend them.

HSF was recently hit by a shareholder backlash over a proposed $440m deal to sell its music catalogue to a partnership between Hipgnosis Song Management and private equity firm Blackstone.

Investors voted overwhelmingly against the deal , as well as against the re-election of chair Andrew Sutch.

They also voted against the trust’s continuation, and the board is now assessing the reconstruction, reorganisation or winding up of the business. It will put its proposals to shareholders within six months of the vote. Should no agreement be reached, the trust could be wound down or sold.

Reporting by Frank Prenesti for Sharecast.com