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UK-listed Hipgnosis Songs Fund Restricted has bought a catalog of round 20,000 songs for a gross consideration of $23.1 million.
In an announcement to the market on Monday (December 11), HSF stated that “these non-core songs, that are a subset of these recognized because the Second Disposal as set out in September, had been bundled with the enduring Songs acquired by the Firm in 2020 as a part of Kobalt Fund One“.
Hipgnosis has not confirmed the title of the client.
The ‘Second Disposal’ referred to there by HSF was announced on September 14 as a part of a set of proposals by the HSF board and its funding adviser, the Merck Mercuriadis-led Hipgnosis Tune Administration (HSM), which they believed on the time would act as a catalyst for a re–score of the corporate’s share value.
MBW has previously theorized that the ‘Second Disposal’ portfolio could also be comprised of round 18,000 songs as soon as owned by Nettwerk‘s music publishing arm.
These 18,000 ‘Nettwerk’ songs had been acquired by HSF as a part of its November 2020 buyout of ‘Kobalt Fund One’ for $323 million – a deal which noticed a complete of 33,000 songs/parts of songs transferred to HSF from Kobalt Capital.
As MBW wrote in July this yr: “That Nettwerk catalog consists of many critically acclaimed songs – by artists comparable to 10,000 Maniacs and Tasmin Archer – that arguably don’t match with Hipgnosis Songs Fund’s central thesis.
That thesis, to cite Mercuriadis in HSF’s monetary studies, is laser-focused on “a portfolio of songs that’s unmatched for its extraordinary success and cultural significance”.
Our July evaluation continued: “The Kobalt transaction was additionally distinctive in Hipgnosis historical past: It seems to be the one time that Mercuriardis (by way of a Hipgnosis firm) has not immediately acquired rights from an artist or songwriter – that means his firm arguably has a lesser connection to the expertise behind the Nettwerk portfolio than with (to call just some artist/writers who’ve bought property to Hipgnosis firms prior to now 5 years) Justin Timberlake, The-Dream, Lindsey Buckingham, or Neil Younger.”
MBW prompt that Kobalt Music Group – which continues to manage the ‘Kobalt Fund One’ property for HSF – could also be a potential purchaser of the ‘Second Disposal’ property from HSF.
Along with the plan to promote the “second disposal” property detailed above, one other proposal put ahead by the HSF board and its funding adviser on September 14 was the plan to promote 29 catalogs (First Disposal Portfolio) to Blackstone-backed Hipgnosis Songs Capital (HSC) for $440 million to fund a share buy-back program and scale back debt.
That bid was executed by way of Mercuriadis-led Hipgnosis Tune Administration, which additionally counts Blackstone as a strategic investor.
On the finish of October, HSF shareholders voted to reject that $440 million provide from Blackstone/Hipgnosis Songs Capital for 29 of HSF’s catalogs.
Confirming the sale of the ‘Second Disposal’ property on Monday, HSF stated that the songs “require time intensive, ongoing accounting and reporting obligations and don’t all have perpetual possession rights.”
HSF added that “their eventual sale was a part of the Firm’s acquisition technique”.
Hipgnosis Songs Fund studies that the gross consideration of $23.1 million for the 20,000 songs bought displays a 14.2% low cost to the valuation of the songs as of 30 September 2023, and represents a 9.6x Web Writer Share a number of.
The sale represents roughly 1% by worth of the corporate’s funding portfolio.
Web proceeds are anticipated to equal roughly $22.6 million. HSF says that these internet proceeds will probably be used to pay down RCF (Revolving Credit score Facilty) drawings, “offering the Firm with higher headroom underneath its future covenant compliance reporting”.
Hipgnosis Songs Fund secured a $700 million revolving credit score facility in October 2022 to refinance an present $600 million in debt.
Along with the information of the confirmed catalog sale, HSF has introduced its appointment of Singer Capital Markets as sole company dealer and monetary adviser, and Shot Tower Capital, LLC as lead adviser to conduct due diligence on the corporate’s property as a part of its ongoing strategic evaluation.
That strategic evaluation was introduced by Hipgnosis Songs Fund’s Board on October 19 forward of the corporate’s vote on October 26 on whether or not to maintain the fund persevering with in its current kind by way of a so-called ‘continuation vote’.
Round 83% of HSF stockholders opted to reject ‘continuation’ – whereas additionally voting to oust HSF’s Chairman, Andrew Sutch.
Final month, Hipgnosis Songs Fund appointed Rob Naylor as its new Chairman of the board and as a non-executive director. As well as, Francis Keeling was named a non-executive director at HSF.
The HSF Board revealed in an update to its strategic evaluation final month that it supposed to nominate unbiased advisers to conduct due diligence on the Firm’s property.
The Board advised the market in an announcement on November 23 that, “completion of this due diligence will present a robust information base from which the Board will begin a strategy of figuring out and bringing ahead various proposals for the way forward for the Firm”.
Throughout this era, the Board stated that it has requested that Hipgnosis Tune Administration Restricted, the Firm’s Funding Adviser led by Merck Mercuriadis-led Hipgnosis Tune Administration, to suggest “various phrases for his or her future funding advisory preparations to the Firm”.
As MBW reported in October, Hipgnosis Tune Administration and Merck Mercuriadis have an unique ‘name choice’ in place to purchase the whole thing of HSF’s property if HSM is ever terminated as HSF’s funding adviserMusic Enterprise Worldwide
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