- The firm intends to bring a ‘Part 20 Claim to the High Court’
- It is about seeking ‘full compensation’ for both HSM and Mercuriadis
Hipgnosis Songs Fund (HSF) has filed a High Court lawsuit against its investment adviser Hipgnosis Songs Management (HSM) and former CEO Merck Mercuriadis.
The investment fund told investors on Monday that Mercuriadis and HSM have refused to indemnify HSF for any liabilities “that may arise from Mr. Mercuriadis’ alleged misconduct.”
The music rights investment fund had earlier this month sought damages from a lawsuit filed by a former company of Mercuriadis against the fund, its investment advisor and the industry veteran, accusing the trio of stealing an “opportunity for business”.
But HSF has been rejected by its investment adviser and now intends to file a “Part 20 Claim in the High Court” seeking “full compensation” from both HSM and Mercuriadis, it said.
Merck Mercuriadis (left) founded HSF with Chic guitarist Nile Rodgers (right) in 2018 after a career managing artists including Iron Maiden, Morrissey and Guns ‘N’ Roses.
In a statement on Monday, HSF added: “The company is concerned, having been assured by Mr Mercuriadis and the investment advisor that these claims are unfounded and that they intend to vigorously defend them, that the claim for compensation has been rejected.” .
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.
Hipgnosis Songs Fund Shares They were down 0.15 per cent at 66p in morning trading on Monday.