Hipgnosis pulls dividend as expected retroactive royalties halve
Hipgnosis Songs fund CEO Merck Mercuriadis (pictured)
According to a regulatory statement, the embattled investment trust has seen its expected retroactive payments more than halve, falling 54% from $21.7m to $9.9m, as at 31 March 2023.
Hipgnosis Songs music catalogue sale comes under scrutiny as continuation vote looms
This comes as valuer Citrin Cooperman notified the trust on Friday (13 October) that, as a result of a decision made by the US Copyright Royalty Board in relation to royalties spanning 2018-2022 (CRB III), it would lower its valuation of the portfolio as of 30 September 2023.
As such, the Hipgnosis board expects to receive «significantly lower» payments for this period.
It has also withdrawn its proposed interim dividend of 1.1325 pence per share, announced less than a month ago, in order to ensure compliance with its revolving credit facility's fixed charge cover ratio covenant.
The trust is also in discussion with its agent and lenders to «avoid any potential impacts» of the unwinding of the CRB III accrual on future covenant compliance.
Peel Hunt analyst Thomas Pocock said the reduced payments adds «significant uncertainty» to the trust's prospects, particularly given its lack of commitment to not breach debt covenants.
Hipgnosis Songs chair Andrew Sutch to step down as managers given ultimatum
«We expect this uncertainty, combined with the withdrawal of the dividend to result in a potentially material negative share price reaction,» he wrote. «Furthermore, as well as SONG's continuation vote, we note that the vote on the sale of $440m of music catalogues is scheduled for 26 October 2023 and we await confirmation as to how the unwinding of accruals may affect this transaction.»
Hipgnosis Songs fund's
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