Hipgnosis Songs Fund, which owns the streaming rights to artists ranging from Beyoncé to Neil Young, has sold a chunk of its song rights at a steep discount to raise cash.
The fund said on Monday that it had sold 20,000 unspecified “non-core” songs for $23.1m (£18.4m), in a statement to the London Stock Exchange, where it is listed.
The price was a 14% discount to their valuation at 30 September, in a sign of the company’s need for cash as it tries to meet its debt obligations.
Hipgnosis was founded in 2018 by Merck Mercuriadis, who argued that online streaming had made the rights to long-lasting music hits an attractive investment proposition.
Mercuriadis was formerly the manager of artists including Elton John, Guns N’ Roses, Morrissey and Iron Maiden, and used his contacts to become a powerful player in the music business, snapping up the rights to song catalogues in a series of deals.
However, the fund has been in turmoil as interest rates have risen, making the prospect of future income from streaming royalties less attractive to investors and forcing changes to how it calculates the value of future revenues.
The fund listed on the London Stock Exchange in mid-2018 with a share price of £1. It rose above £1.25 in 2021, before slumping steeply below the £1 mark in September 2022. Since then it has fallen below 70p.
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.
It also failed in an attempt to sell almost a fifth of its back catalogue to Blackstone, a private equity investor, for $440m, a discount of 24% to their previous valuation once fees were taken into account. Blackstone had previously invested in Hipgnosis Song Management, the entity that in effect decides on investments in the fund, and Mercuriadis was the adviser to the the private equity firm’s vehicle. Shareholders in the Hipgnosis fund balked at offering such a big discount to a related party, voting against the deal in late October.
Hipgnosis said it had always planned to sell the songs in the sale announced on Monday. It said they required “time-intensive, ongoing accounting and reporting obligations and do not all have perpetual ownership rights”.
The fund said it would use the proceeds from the sale to pay back some of its revolving credit facility, “providing the company with greater headroom under its future covenant compliance reporting”.
The fund faces other problems. Its auditor, PwC, last month said it would not reapply for the job, and it is seeking a new chair after shareholders voted symbolically against Andrew Sutch, its outgoing chair. Hipgnosis will report results for the six months to 30 September on Tuesday next week.