Hipgnosis scraps dividend after hit to US music royalties

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Hipgnosis Songs Fund, the UK-listed music rights owner, has scrapped plans to pay an interim dividend after warning that the move would have threatened its compliance with debt covenants following a cut in the payments the group expects from its US catalogue.

The company’s independent portfolio valuer, Citrin Cooperman, had “materially reduced” expectations of industry-wide payments following a decision last year to recalculate the rate by the US Copyright Royalty Board, Hipgnosis said on Monday.

The decision covered royalties payable to songwriters between 2018 and 2022, and meant the company would receive “significantly lower” payments.

Shares in Hipgnosis tumbled 16 per cent in early trading on Monday.

The company said it would withdraw the proposed interim dividend it had announced last month to ensure it was not in breach of the terms on a revolving credit facility the group has with lenders.

Hipgnosis added that it was talking to lenders to avoid further impact on its ability to comply with covenants from the decision by the Copyright Royalty Board.

Future dividends would depend on a “satisfactory conclusion” of these discussions with lenders, it said.