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Citrin Cooperman, the influential valuer of music rights/transactions, has considerably decreased its expectation of the sum of money that Hipgnosis Songs Fund (HSF) will obtain associated to the Copyright Royalty Board’s landmark resolution within the US generally referred to as CRB III.
On account of CRB III, which was finalized in late 2022, music streaming providers have been instructed that they wanted to retrospectively enhance the royalty charges for songwriters and publishers when it got here to music performed on their providers within the US between 2018 and 2022 (inclusive).
In consequence, those self same streaming providers – together with Spotify, Amazon Music, Apple Music and so on. – have been left on the hook for lump-sum funds to music rightsholders to cowl these retrospective fee rises.
This morning (October 16), UK-listed Hipgnosis Songs Fund knowledgeable its shareholders that Citrin Cooperman had now “materially decreased its expectations of industry-wide retroactive funds in relation to the US Copyright Royalty Board’s resolution in relation to royalties payable to songwriters for the interval protecting 2018-2022 (‘CRB III’) for its valuation of [HSF’s] portfolio”.
In July, Hipgnosis Songs Fund revealed its annual report for the yr to finish of March 2023. As lined in an MBW report at the time, HSF’s report detailed an anticipated $21.7 million accrual from the ‘CRB III’ streaming royalty ruling within the US, which might be acknowledged in HSF’s FY 2023 yr.
At present (October 16), due to the change in Citrin Cooperman’s expectations, HSF’s board mentioned that it now “expects to obtain considerably decrease retroactive funds in relation to CRB III” and “due to this fact intends to scale back its CRB III retroactive accrual to $9.9m, from $21.7m as at 31 March 2023″.
A discount in that anticipated retrospective CRB III cost from $21.7 million to $9.9 million represents a decline of 54.3%, or $11.8 million, in Citrin Cooperman’s forecast.
On account of this alteration – and a consequent discount within the worth of HSF’s portfolio – the music firm has immediately instructed shareholders it’s withdrawing its previously-proposed, upcoming interim dividend of 1.1325 pence per share “as a way to guarantee compliance with its revolving credit score facility’s Mounted Cost Cowl Ratio covenant”.
(Hipgnosis Songs Fund introduced $700 million-worth of debt refinancing in October final yr through a five-year revolving credit score facility, or RCF; that RCF got here with situations related to Hipgnosis Songs Fund’s portfolio value and its annual EBITDA.)
The timing of Citrin Cooperman’s change in its CRB III expectation is hardly nice information for HSF shareholders.
Stated shareholders have been due to be paid their (now-scrapped) interim dividend on October 27, the day after a vital set of HSF shareholder votes are scheduled to happen.
On October 26 – barring a change in schedule – HSF shareholders are expected to vote on each:
- (a) The continuation of the corporate in its current kind (‘continuation vote’); and
- (b) A proposed $440 million acquisition of a portfolio of copyrights from HSF by Blackstone-owned Hipgnosis Songs Capital.
The previous will likely be voted on at HSF’s Annual Basic Assembly (AGM); the latter will likely be voted on afterward, at an Extraordinary Basic Assembly (EGM).
HSF’s word to shareholders immediately continued: “As well as, [HSF] is in dialogue with the agent and the lenders to keep away from any potential impacts of the unwinding of the CRB III accrual on future Mounted Cost Cowl Ratio covenant compliance.
“Topic to passable conclusion to discussions with lenders, the Board expects to declare and pay future dividends as focused. An extra announcement will likely be made in the end.
“The individual chargeable for making this notification is Andrew Sutch, Chairman of Hipgnosis Songs Fund Restricted.”
Andrew Sutch announced last month he was to exit his function as Chairman of Hipgnosis Songs Fund. HSF has begun a course of to recruit his successor.Music Enterprise Worldwide
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