Music royalties investment firm Hipgnosis Songs Fund has slashed the value of its portfolio by more than a quarter and warned it would need to prioritise paying down debts as woes mount at the troubled group.
The fund, which owns the back catalogues for artists including Justin Bieber and Shakira, said the latest valuation by a newly-appointed adviser, Shot Tower, saw the mid-point value of its songs catalogue cut by 26.3% since the end of September, to 1.93 billion US dollars (£1.5 billion).
The embattled group – co-founded by former Beyonce manager Merck Mercuriadis and Nile Rodgers of Chic – said that due to the fall in its net asset value, it would need to use the firm’s free cash to pay down debt and therefore would not be restarting shareholder dividend payouts “for the foreseeable future”.
Shares in the fund plunged another 9% in Monday morning trading after the latest blow.
Shot Tower was appointed as an independent valuer following disagreements between the firm and its investment advisor, Hipgnosis Song Management Limited (HSM), over the value of its assets.
Robert Naylor, chairman of Hipgnosis Songs Fund, said: “The newly constituted board is making good progress with the due diligence work that will underpin its strategic review.
“We are disclosing the valuation at this time given its material difference to valuations previously disclosed.
“The board will provide further detail on this when the due diligence is complete.
“The board remains focused on identifying all options to deliver shareholder value.”
It comes amid an increasingly intense relationship between HSM and the board of Hipgnosis Songs Fund (HSF), whose assets HSM manages.
The fund is currently undergoing a strategic review process that could see its assets sold or wound up completely.
However, bosses at the fund recently warned that a call option held by HSM, which allows it to buy HSF’s assets, is damaging the value of the portfolio and therefore impacting upon demand from possible suitors.
In January, HSF said it was willing to offer up to £20 million to anyone who wishes to make a bid for its music catalogue in a move to entice suitors.
HSM announced last month that it was shaking up its leadership team, with co-founder Mr Mercuriadis stepping down as chief executive, to become the fund manager’s chairman.
He has been replaced in the top role by Ben Katovsky, previously chief operating officer of HSM.