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- HSF will now bring a ‘Part 20 claim to the High Court’ against Mr Mercuriadis
- This is to seek full compensation.
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Hipgnosis Songs Fund could be liable for alleged personal misconduct by founder Merck Mercuriadis, the embattled music rights trust warned on Monday.
HSF told investors it will press ahead with its High Court lawsuit against its former chief executive Mercuriadis after refused to “indemnify the company for any liabilities that may arise from its alleged misconduct.”
In a statement, HSF said it “now intends to bring a Part 20 claim to the High Court against Mr Mercuriadis in which it will seek full compensation.”
The investment fund told investors on Monday that Mercuriadis (pictured) has refused to “indemnify the company for any liabilities that may arise from his alleged misconduct.”
HSF earlier this month sought damages from a lawsuit filed by a former Mercuriadis company against the fund, its investment advisor and the industry veteran, accusing the trio of stealing a “business opportunity.”
Hipgnosis Music Limited, which was founded in 2015 and is now being dissolved, alleges that HSF “unlawfully assisted Mr Mercuriadis or received” a “diversion from a business opportunity”.
HSF has previously said it was not insured against the cost of dealing with Hipgnosis Music Limited’s claim.
The announcement is the latest in a series of events that have strained HSF’s relationship with Mercuriadis and HSM.
In January, Hipgnosis said it would offer any potential buyer up to £20m as “cost protection” to purchase its entire catalogue. Investors will vote on the proposals on Wednesday.
This raises concerns that HSM’s ‘call option’, which gives it the right to buy the fund’s portfolio of songs, would severely depress the value of the assets and leave investors suffering significant losses.
Its board is fighting to secure the company’s long-term future and protect the value of its assets, amid an ongoing dispute with its investment adviser over an alleged conflict of interest.
The Canadian founded HSF with Chic guitarist Nile Rodgers in 2018 after a career managing artists including Iron Maiden, Morrissey and Guns ‘N’ Roses.
HSF racked up huge debts by purchasing the catalogs of dozens of musicians, including Blondie, Shakira, the Red Hot Chili Peppers and Fleetwood Mac’s Christine McVie and Lindsey Buckingham.
This led to their value plummeting as successive interest rate hikes by the Bank of England reduced the attractiveness of music royalties relative to other asset classes such as bonds.
To try to reduce debts and finance a share buyback, Hipgnosis agreed last year to sell about a fifth of its music portfolio for 372 million pounds to funds advised by Blackstone, the world’s largest asset manager.
But in late October, investors voted against the deal and allowing the company to continue operating as an investment trust.
Actions of hypognosis fell 1.10 per cent to 62.90 pence in early trading on Monday afternoon
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