Christian Mayes, Portfolio Adviser, 19 OCTOBER 2023:
Analysts have warned of a potential breakdown in the relationship between the board of the beleaguered Hipgnosis Songs Fund and its investment adviser.
In a stock exchange announcement today (19 October), the Hipgnosis board announced a strategic review and said it would consider “all options” for the trust’s future, including a review of future management arrangements…
The trust is subject to an AGM and EGM next week (26 October), at which it will face votes on continuation and on the sale of a portion of the Hipgnosis portfolio to a Blackstone-owned private vehicle…
Call option
The board noted it had considered serving notice on the current investment adviser, Hipgnosis Song Management (HSM), but decided it was not currently in shareholders’ interests to do so as it would lead to a default on its revolving credit facility due to the termination fee.
Directors revealed HSM had declined to remove a clause which entitles it to acquire the trust’s portfolio in the event of a termination…
‘Appetite’ for private sale
It added the refusal to remove the call option suggests Blackstone has “the appetite” to purchase the trust’s assets…
On the potential sale, James Carthew, QuotedData head of investment companies, added: “There seems to be an underlying suggestion that the company’s finances are so precarious that it needs to sell these catalogues – even at knock down prices – to shore up its balance sheet.
“Given that risk free yields are still climbing and the transactional evidence will undermine the NAV, there must be a high risk of a big NAV writedown to come. Would investors still have a continued belief in the portfolio then?”
Read more here