Hipgnosis Songs Fund has pulled its proposed interim dividend announced last month.
The dividend of 1.1325 pence per share has been withdrawn as a result of lower expectations for retroactive payments in US royalties.
The decision comes ahead of a vote next week where Hipgnosis shareholders will decide whether to back the investment trust for another five years, in line with regulatory requirements in London.
In a bid to boost its share price with a buy back programme, Hipgnosis has entered into a transaction to sell catalogues to a fund backed by Blackstone (Hipgnosis Songs Capital) for $440m.
An industry-wide agreement on royalty rates for 2018-22 (CRB III) was announced last year by the US Copyright Royalty Board.
Citrin Cooperman, Hipgnosis’ independent portfolio valuer, has materially reduced its expectations of industry-wide retroactive payments in relation to the US Copyright Royalty Board's decision for the period.
As a result, the board now expects to receive significantly lower retroactive payments in relation to CRB III and has reduced its accrual to $9.9m, from $21.7m as of March 31, 2023.
The interim dividend has been withdrawn in order to ensure compliance with its revolving credit facility's fixed charge cover ratio covenant.
In addition, Hipgnosis is in discussion with the agent and the lenders to avoid any potential impact on future fixed charge cover ratio covenant compliance.
“Subject to satisfactory conclusion to discussions with lenders, the board expects to declare and pay future dividends as targeted,” said a Hipgnosis statement issued via the London Stock Exchange.