About two months back, Utopia Distribution Services touted a tie-up with logistics company DP World and the adjacent opening of what’s said to be the UK’s largest media warehouse. Now, it’s emerged that two of the major labels have formally offered a rescue plan to keep Utopia Distribution afloat.
The financial lifeline from Sony Music Entertainment (SME) and Universal Music Group (UMG) – as well as the terms of the underlying loan agreements – became public in disclosures filed by Utopia Distribution Services (UDS).
For background, the overarching Utopia Music, having embarked on an acquisition spree during 2021 and part of 2022, has experienced well-documented challenges to this point in 2023.
Specifically, the business has offloaded several (recently purchased) units, laid off team members, filed for bankruptcy in certain divisions, and reportedly faced outstanding tax debts. “All” of the latter have now been paid in their entirety, according to a statement provided to DMN in late July by CEO Mattias Hjelmstedt.
But the same capital difficulties and operational hurdles for Utopia Music proper seem to have prompted the initially mentioned Utopia Distribution Services to potentially turn to UMG and SME for support.
The corresponding regulatory filings – certificate of charge registrations describing the assets behind the loans – don’t appear to identify the exact financial details at hand.
However, the documents do make clear that the debenture agreements would secure the loans with Utopia Distribution Services assets including “all freehold and leasehold property now vested in” the Utopia Music subsidiary “to the extent it relates to or affects in any way the IT Systems, together with all buildings, fixtures (including trade fixtures) and fixed plant and machinery…to the extent it relates in any way to the IT Systems.”
(IT systems in this instance refer to “all hardware, software and other peripheral equipment that is” used by UDS “in relation to the operation of the physical distribution services it provides to its clients.”)
Also encompassed are Utopia “goodwill and rights in relation to trade secrets” pertaining to IT in some way, and the text further emphasizes that Sony Music and/or Universal Music can “at any time” convert the described floating charge into a fixed charge “immediately.”
Predictably, given the described components and nature of the agreements, the secured assets of UDS will “become enforceable” at once after a failure “to pay any sum…which has become due and payable following a demand for payment from Universal,” any steps to liquidate, or if the distribution operation goes out of business altogether.
“The Company [Utopia Distribution] irrevocably and by way of security appoints Sony…to execute and deliver and otherwise perfect any deed, assurance, agreement, instrument or act which may be required of the Company under this Debenture and which the Company has failed to execute and deliver or perfect within 3 Business Days of being requested to [do] so in writing by Sony,” the agreement’s power of attorney section drives home.