Hipgnosis Songs Fund Takes Legal Action ‘To Secure An Indemnity from Merck Mercuriadis’ As Liquidator-Levied Lawsuit Ramps Up

Photo Credit: Hipgnosis Songs Fund

Another day, another round of Hipgnosis drama: The publicly traded songs fund is seeking “full indemnity” after being named in a lawsuit from the liquidators of a long-defunct Hipgnosis business founded by Merck Mercuriadis. Hipgnosis Songs Fund (HSF), featuring a revamped board and working to attract a possible third-party buyer for its music IP, today announced the formal indemnity push. As many know, HSF and its “investment adviser,” Blackstone-powered Hipgnosis Song Management (HSM), have for some time been embroiled in a heated dispute.

That showdown, fueled by factors including a debt-necessitated acquisitions halt, a badly sagging share price, and the terms of HSF’s agreement with HSM, brought about a vote against HSF’s continuation in October of 2023. There’s currently a late-April deadline for the operation’s Robert Naylor-led board to officially propose a plan for the future – hence the aforesaid effort to woo a non-Hipgnosis buyer.

Less widely known (or at least discussed) is the lawsuit levied against HSF, HSM, and Mercuriadis alike over a predecessor entity called Hipgnosis Music Limited (HML).We’ve already covered the case and the convoluted chain of events that set it in motion. Stated briefly, Mercuriadis was (or is, as Hipgnosis Songs Fund sees it) an HML director alongside an individual later convicted and sentenced to prison for his role in a massive pensions scheme.

HML was wound up in February of 2018 with millions owed to creditors, and the previously noted liquidators formally served the defendants with the complaint in November of 2023, following a lengthy investigation. Central to the suit is an alleged breach of fiduciary duty and a diversion of certain business opportunities from the shuttered HML and to its namesake successors, according to reports.

On February 5th, only days after Mercuriadis stepped down as CEO of HSM in favor of a presumably more inconspicuous post as chairman, HSF in a release said it had hired its own counsel. Also disclosed were the songs fund’s plans to “seek to secure an indemnity from” Mercuriadis and HSM “against any liability that might be incurred” as a result of their alleged actions.

Now, according to HSF’s February 19th release on the subject, HSM and Mercuriadis “refused to indemnify” it “against liabilities which may arise from” the veteran music manager’s “alleged misconduct.” “The Company is concerned,” Hipgnosis Songs Fund proceeded, “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.”

Moreover, HSF “is not insured as to the costs of this claim,” per the text, and is poised to “seek a full indemnity” via a Part 20 High Court claim against Hipgnosis Song Management.

Needless to say, it’ll be worth closely following the lawsuit and its implications for the future of the HSF-HSM tie-up, which, if recent events and investors’ clear-cut positions are any indication, will prove exceedingly difficult to salvage. And while the subject often takes a backseat in necessarily detailed descriptions of the saga, the fate of the songs fund’s many valuable catalogs is up in the air as a result.