Hipgnosis Songs Fund has announced that it will be withdrawing its proposed interim dividend due to anticipated lower retroactive payments resulting from recent U.S. copyright royalty adjustments.
Withdrawing Proposed Dividend
The London-listed music investor has decided to withdraw the proposed interim dividend of 1.1325 pence (1.4 cents) per share that was previously disclosed on September 21st. This decision has been made to ensure compliance with the fixed cover charge ratio covenant of its revolving credit facility.
Reduction in Retroactive Payments
Hipgnosis revealed that Citrin Cooperman, its independent portfolio valuer, has significantly revised down their expectations for industry-wide retroactive payments. This adjustment follows the publication of the U.S. Copyright Royalty Board’s decision on rates and terms for songwriters’ royalties from 2018 to 2023.
As a result, Hipgnosis now anticipates receiving substantially lower retroactive payments and intends to reduce its retroactive accrual for the period from $21.7 million to $9.9 million as of March 31.
Mitigating Potential Covenant Compliance Issues
To prevent any potential negative impact on future covenant compliance resulting from the reduction in accruals, Hipgnosis is currently in discussions with its agent and lenders. The company is working towards reaching a satisfactory resolution, which will allow it to declare and pay future dividends as planned.