Hipgnosis Songs Fund (SONG) has announced that on 13 October 2023 Citrin Cooperman, SONG’s independent valuer, has materially reduced its expectations of industry-wide retroactive payments in relation to the U.S. Copyright Royalty Board’s decision regarding royalties payable to songwriters for the period covering 2018-2022 (CRB III). This means that the board expects significantly lower retroactive payments from CRB III, and has reduced the respective accrual values from $21.7m to $9.9m.
As a result the board has also withdrawn its proposed interim dividend to ensure it remains in compliance with the Fixed Charge Cover Ratio covenants on its revolving credit facility. The board expects to pay future dividends as targeted, conditional on remaining in compliance with said covenants.
[QD comment (James Carthew): “This comes as a real surprise and we cannot really fathom how it has arisen. The CRB III review took years to finalise but just fixed a new percentage rate for songwriters’ earnings that was backdated to the start of the review period. The percentage that was going to be applied has been known for some time and certainly well before SONG’s last year end. How then was this accrual more than twice what it should have been? I think that to omit the dividend as a result shows how precarious SONG’s cashflows and covenant compliance are. This just reinforces the case for a vote against continuation.”]