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Hipgnosis Songs Fund, the troubled music rights investment trust, has launched a strategic review that could change the terms of its management agreement following shareholder dissent over plans to sell off part of its portfolio.
HSF is managed by founder and former band manager Merck Mercuriadis, and overseen by an independent board of directors. The company said the review would look at all options, including its management arrangements.
The company is fighting to win investor support for a crucial vote over its future next week, when shareholders will be asked to approve a continuation of the investment trust for a further five years.
Shareholders have been unhappy with some of the terms of the management agreement, including one that would allow the manager to buy the company’s portfolio on termination of its contract. HSF said the manager had turned down a proposal to change this arrangement.
It also said it had considered serving notice on Mercuriadis to terminate its agreement, but had concluded that the move would not be in shareholders’ interests. The move would lead to a default of its debt facility unless a new manager had been approved by lenders, it said.
The company said its lenders had agreed to changes to its revolving credit facility that would mean it was again compliant with a fixed charge cover ratio covenant.