Hipgnosis Song Fund (HSF), a UK-based fund that specializes in music rights and royalties, is set to sell some of its song catalogues in order to improve its financial position. The sale, valued at $440 million, includes catalogues from artists like Shakira, Nelly, and Bob Rock. The buyer of the song assets is Hipgnosis Songs Capital, a sister fund owned by Blackstone. HSF is also selling a collection of non-core songs for $25 million to another buyer.
HSF plans to use the proceeds from the sale to fund a share buyback program and reduce debt, with the goal of increasing its stock price. The company believes that its stock is undervalued and wants to align its market value with its true worth. In July, Hipgnosis had already mentioned a potential sale to support its stock.
Here are some key figures related to the stock-rescue sale by Hipgnosis:
– Total expected earnings from the sale: $465 million
– Cost of HSF’s share buyback program: $180 million
– HSF’s repayment obligations under the revolving credit facility (RCF): $250 million
– Percentage of the existing portfolio that HSF will retain: 81%
– Number of songs that HSF will retain from Rolling Stone’s 500 Greatest Songs of All Time list: 47 (down from the current 52)
– Total return on HSF’s sale for shareholders: 44%
– Duration for other interested parties to present better proposals under the go-shop clause: 40 days
– Termination fee for interested parties who fail to present a better proposal: $6.6 million
– Amount of money Blackstone agreed to deploy in 2021 to buy music rights in partnership with Hipgnosis: $1 billion
Another company of interest in the music copyright asset industry is Round Hill Music Royalty Fund, which recently agreed to a cash takeover offer with Alchemy Copyrights, based in Los Angeles. This collaboration has positively impacted the stock of Hipgnosis.
A significant decision awaits HSF in October, as shareholders will vote on whether to liquidate the fund or extend its operations for another five years.
In other related news, assets from aging rockers like Bob Dylan and Neil Young have become sought-after investments, highlighting a new trend in the music industry. Private equity firms, like HSF and Round Hill, are increasingly focusing on music assets as an investment opportunity. This raises questions about the limits of private equity’s ambitions in this industry.
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