Hipgnosis Songs Fund launches High Court claim against investment adviser and former CEO

Hipgnosis Songs Fund (HSF) has launched a High Court claim against its investment advisor Hipgnosis Songs Management (HSM) and former chief executive Merck Mercuriadis. 

The investment trust told investors on Monday that Mercuriadis and HSM have refused to indemnify HSF against liabilities ‘which may arise from Mr Mercuriadis’ alleged misconduct’.

The music rights investment trust had earlier this month sought indemnity from a claim brought by a former business of Mercuriadis against the fund, its investment adviser and the industry veteran, accusing the trio of stealing a ‘business opportunity’.

But HSF has been knocked back by its investment adviser and it now intends to bring a ‘Part 20 Claim in the High Court’ to seek ‘full indemnity’ from both HSM and Mercuriadis, it said.

Merck Mercuriadis (left) founded HSF with Chic guitarist Nile Rodgers (right) in 2018 following a career managing artists like of 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 adviser that these claims are without merit and that they intend to vigorously defend them, that the request for an indemnity was refused.’

Hipgnosis Music Limited, which was founded in 2015 and is now being wound up, alleges that HSF ‘unlawfully assisted Mr Mercuriadis with, or received,’ a ‘diversion of business opportunity’. 

HSF has previously said it was not insured against the cost of dealing with the Hipgnosis Music Limited claim. 

The announcement is the latest in a series of events that has strained HSF’s relationship with Mercuriadis and HSM.

In January, Hipgnosis declared it would offer any prospective buyer up to £20million as ‘cost protection’ to acquire its entire catalogue. Investors will vote on the proposals on Wednesday.

It follows concerns that HSM’s ‘call option’, which grants it the right to buy the fund’s portfolio of songs, would severely depress the value of the assets and leave investors bearing major losses.

Its board is battling to secure the long-term future of the company 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 following a career managing artists like of Iron Maiden, Morrissey, and Guns ‘N’ Roses.

HSF accumulated huge debts from buying up the catalogues of dozens of musicians, such as Blondie, Shakira, the Red Hot Chili Peppers, and Fleetwood Mac’s Christine McVie and Lindsey Buckingham.

This led to its value plummeting when 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 and lower debts and finance a share buyback, Hipgnosis agreed last year to sell approximately a fifth of its music portfolio for £372million to funds advised by Blackstone, the world’s largest asset manager.

But in late October, investors voted against both the deal and letting the company continue operating as an investment trust.

Hipgnosis Songs Fund shares were down 0.15 per cent to 66p in morning trading on Monday. 

This post first appeared on Dailymail.co.uk