In the aftermath of its failed continuation vote, the board of Hipgnosis Songs Fund (SONG) has provided clarity around the status of its dividend. Having undertaken a review of the SONG’s financial position, the board has determined that it will not declare dividends before the new financial year. The operating cash flow will instead be used to ensure that SONG has sufficient cash resources to fund the payment of the catalogue bonuses as required. The suspension of dividends will also help in ensuring SONG remains in compliance with its revolving credit covenants.
As a result of the same review, it has been determined that the catalogue bonus provision is expected to increase by approximately $23m to $68m at 30 September 2023 as there are now ten (31 March 2023: six) out of SONG’s 146 catalogues likely to meet performance hurdles as defined in their acquisition agreements. Note that there are 19 catalogues with active bonus provisions totalling $75m, that are unlikely to meet performance hurdles and not recognised as provisions but contingent liabilities.
SONG’s board, advised by the investment adviser, is exploring refinements to the methodology adopted in the revenue accrual estimation process, which may result in an accrual adjustment reducing revenue accruals by up to 10%.