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Nigerian music company Chocolate City in trouble, may lose 60% shares…… + Details of the Loan agreement, and genesis of the Dispute!

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Chocolate City’s trouble is a fallout of a recent judgement of a High Court in London.

A leading Nigerian music company, Chocolate City, may lose as much as 60 per cent of its equity to an international partner, WEA International, a subsidiary of New York-based Warner Music Group (WMG).

This is a fallout of a judgement of the Commercial Division of a High Court in London on a loan dispute between the parties.

The judgement bars Chocolate City from prepaying a $1.7 million loan it took from the American record label ahead of the loan’s due date in 2024, while also affirming the lender’s right to choose to be paid back with 60 per cent of the borrower’s shares.

The judgement, delivered on 16 November, affirmed that WEA/WMG has the right to either choose to accept the payment with full interest at the due date or convert the loan to 60 per cent of Chocolate City’s shares.

The High Court’s decision put an end to the move by Chocolate City to exit the loan obligations early, to preempt the lender from taking the option of demanding 60 per cent of its shares as a means of offsetting the loan.

Chocolate City had sought to prepay the loan in 2022, whereas the loan has a term of five years, from 2019 to 2024.

In his judgement, a copy of which was obtained by PREMIUM TIMES, the judge, David Foxton, ruled that prepayment of the facility before the due date was not envisaged under the agreement the parties signed.

“There is no right to pay off any negative balance under the ADA Distribution Agreement before the Maturity Date or termination of the Facility (implicitly under clause 17.21),” the judge said.

Chocolate City, founded in 2005 by Audu Maikori, Paul Okeugo and Yahaya Maikori, obtained the loan in issue from WEA under a contractual agreement they entered into on 27 March 2019.

According to the court judgement, the agreement signed by the parties was for $1.8 million ($1,832,500) ‘Convertible Term Loan Facilities’.

A convertible loan is one which will either be repaid or, in most cases, converted into equity at a future date. It is a form of financing that ordinarily takes less time than an equity funding round, which can be costly and time-consuming.

The loan obtained from WMG was to be “payable in full or convertible into 60 per cent of the equity interests” of Chocolate City.

Promising deal

At the promising beginning of the deal, on 28 March 2019, a day after the agreement was signed, Warner Music Group (WMG) announced a pioneering partnership with Chocolate City.

Under the partnership listed on its official website, Chocolate City artistes would join WMG’s repertoire and receive the support of the company’s distribution and artiste services via its independent label services division, Alternative Distribution Alliance (ADA).

At the time, WMG said that the partnership with Chocolate City would dramatically grow the reach of African artistes worldwide and create new opportunities for global superstars in the region.

Under the terms of the deal, music from the label’s artistes would join Warner Music’s repertoire, and they would receive the support of the company’s global expertise, including distribution and artiste services via ADA.

WMG also promised financial support for Chocolate City to help achieve its mission of signing and developing the best local talent in this fast-growing market.

Chocolate City loan agreement details

Details of the loan deal were reproduced in the court’s judgement on the dispute that later ensued between the parties.

The judge referenced some pre-contractual documents signed by the parties for a better understanding of the deal.

The judge said the pre-contractual documents are not legally binding but help shed light on the unclear details of the contract itself.

Some of the documents include the Letter of Interest (LOI) dated 15 August 2018 which was signed by Chocolate City and Warner Music Inc (of which WEA is a part).

There was also a non-binding Term Sheet dated 17 January 2019 signed by Chocolate City and WEA.

Certain correspondences were also cited by the judge as helping to establish the facts and details of the loan agreement.

From the Letter of Interest, the judge said, the agreement was designed for WMG or its affiliate(s) to provide financing to Chocolate City “in the form of a convertible note”.

The loan was to be “payable in full or convertible into 60 per cent of the equity interests” of Chocolate City.

The judge referenced an email dated 27 September 2018 which WMG sent to Chocolate City, explaining what the “convertible loan structure” that parties had been discussing entailed.

WMG explained in the email that at the end of the term loan, that is, after five years, the investor (WMG) would have “the option of accepting a return in the form of principal plus interest or equity in the company”.

In response to the clarification by WMG, the judge said while reviewing the documents filed by the parties to the case, Chocolate City responded by stating, “We are aligned”, and “We are happy to move ahead with the deal.”

In the Term Sheet which the parties also signed, it was stated under the ‘Proposed Transaction’ section that the transaction was an investment “by way of secured loan, convertible into equity in the Company at the Lender’s option at the Maturity Date.”

How dispute started

By 2022, Chocolate City had drawn down on the $1.8 million facility to $1.7 million.

Dispute between the parties over the facility began to rear its head when, on 8 September 2022, Chocolate City served a prepayment notice on WEA, indicating its decision to prepay the full amount of the loan together with accrued interests on or before 20 December 2022.

Citing Clauses 8.3(a) and (b) of the Facility Agreement, Chocolate City asserted its right to prepay the loan, and requested that WEA provide its bank details for prepayment to be made.

On 13 September 2022, WEA responded that Chocolate City was not entitled to make a prepayment. Therefore, WEA did not provide its bank details.

Chocolate City then filed an application in court for summary judgment seeking declarations to the effect that it is contractually entitled to prepay the amount outstanding under a convertible term loan facility ahead of the specified maturity date.

Chocolate City was represented by Nathan Searle and George Harnett of Hogan Lovells International LLP.

WEA, represented by Tamara Oppenheimer KC and Gillian Hughes of Dentons UK and Middle East LLP, cross-applied for summary judgment for a declaration that Chocolate City is not entitled to prepay the facility.

Citing Clause 7 of the loan agreement, WEA insisted that “the borrower shall repay the loans in full together with any interest accrued on the Maturity Date”.

Judgement

In his judgement, Mr Foxton ruled that prepayment of the facility before the due date was not envisaged under the agreement.

This finding, the judge said, tallies with WEA’s rights recognised in clause 7 of the facility up to the maturity date.

He said the clause “presupposes that the Facility will only be terminated on the Maturity Date or pursuant to early termination under clause 17.21.”

The judge, who said WEA’s interpretation of the agreement was more acceptable than Chocolate City’s, said he was satisfied that “the commercial purpose of the transaction” affirmed WEA’s construction of the agreement.

He said the loan agreement “gave WEA an embedded right to swap the outstanding debt for equity at the Maturity Date if it decided it was in its economic interests to do so.”

“That commercial purpose lends strong support to WEA’s construction, but Chocolate City’s construction would be inimical to it,” the judge said.

In conclusion, Mr Foxton noted that “Chocolate City does not have a real prospect of establishing a right to prepay the loan made to it by WEA, and WEA’s construction is correct. Chocolate City fails on its application for summary judgment, and WEA succeeds on its cross-application for summary judgment.”

Implication for Chocolate City

The judgement, affirming WEA/WMG’s interpretation of the agreement, gives the American conglomerate the discretion to accept payment in cash or convert the loan sum to 60 per cent of Chocolate City’s equity when the facility is due for repayment.

The judge ruled that it was at WMG’s sole discretion to decide whether all or a portion of the loan “be converted into an unrecouped balance under the Distribution Agreement”.

PT contacted Chocolate City’s CEO, Abuchi Ugwu, on the phone on Wednesday to find out if the company will appeal against the judgement or has other plans to avert losing a majority of its shares to its estranged partners. Mr Ugwu asked our correspondent to email the questions to him, but he has yet to respond to our email enquiry as of the time of filing this report.

Chocolate City has been home to recording artistes such as M.I Abaga, Nosa, Dice Ailes, Victoria Kimani, Ice Prince, DJ Caise, DJ Lambo, Jeremiah Gyang, Ruby Gyang, Pryse, Brymo, Koker, Jesse Jagz, Lemon Adisa, Mr Gbafun, Ijay, and Kahli Abdu, VHS Safari and more.

But the artistes currently on the label are Tariq, Noondave, YoungJohn, Blaqbonez, CandyBleakz and MajorAJ.

Source: Premium Times.

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Juju Music Sensation Dele Taiwo’s Star-Studded Birthday Bash in Lagos To Hold On Sunday

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The cozy Avalanche Club is set to become the epicenter of a grand celebration this Sunday as renowned Juju musician, Asiwaju Dele Taiwo, affectionately known as Dele Taiwo, commemorates his birthday with a star-studded event dubbed “Asiwaju Dele Taiwo and Friends Live In Lagos.”

This highly anticipated celebration, powered by Otunba Femi Davies of Metronews and Otunba Bestman Nze Jumbo of Team Nigeria for Change, promises to be an unforgettable evening, featuring performances from top Juju musicians such as Queen Ayo Balogun, Hessking, Fuji rave , Alh Wasiu Haruna Ishola son of the Apapa legend, Haruna Ishola. Boye Best is also top on the list of artistes that will thrill the birthday celebration audience.

The event is surely a testament of the profound respect and admiration the Nigerian music community holds for Dele Taiwo, a prominent figure in the industry.

Otunba Bestman, expressing his excitement, shared, “Asiwaju Dele Taiwo is my friend and a force to reckon with in the Nigerian music space. It is our style in Team Nigeria for Change to identify and celebrate such outstanding acts. So, myself and some friends believe it is not too much to celebrate such a person who has made huge impacts on his birthday.”

The venue for this exclusive birthday celebration, Avalanche Restaurant and Lounge, is strategically chosen for its cozy and pleasurable ambiance.

Owned by Hon. Kehinde Paul Bankole, this upscale venue is located at 5, Bamako Estate, Opposite Omole Phase I, in Lagos.

Hon. Bankole emphasized the special nature of this event, stating, “Gentleman Dele Taiwo’s birthday celebration is a special appearance for me personally and I can assure our guests that the best treatment in terms of hospitality awaits them at Avalanche this Sunday.”

Guests attending the event can look forward to a glamorous evening starting with a red carpet reception at 4:00 PM, setting the tone for a night filled with music, celebration, and high spirits.

Asiwaju Dele Taiwo’s birthday bash is not just a celebration of his life but also a tribute to his contributions to the Juju music genre, bringing together friends, fans, and fellow musicians in an evening of joy and festivity.

Media support includes City People magazine, MetroNews, Eko mi Eko e, Freelanews, Society Reporters, SocietyGist, Goldmyne, Islanders Events magazine, Dior events, Dope TV, and many more.

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Banky W survives fourth cancer surgery

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Nigerian singer, Olubankole Wellington, popularly known as Banky W, has undergone a fourth cancer surgery.

The Made For You crooner, In a heartfelt post on his Instagram page on Thursday, expressed gratitude to God for his recovery.

Banky W thanked his wife, family, friends, and pastors for their unwavering support and prayers, as well as his medical team, Dr. Onyewu and Dr. Adenuga, for their expertise and care.

Sharing a video he wrote, “Christ 4 – Cancer Tumors 0

“Sometimes, your faith in God will not prevent the storms from coming… but it will carry you through them. Faith won’t always stop you from hurting, but it will help you heal, and it will help you deal.

“God never said the weapons wouldn’t form, He promised that they wouldn’t prosper. He never said the enemy wouldn’t come… He promised that when the enemy comes in like a flood, the Spirit of God would raise a standard against him.

“Posting this testimony to encourage anyone out there who is going through a challenge. It might seem bigger than you, but greater is He that is in you than anything you will face in this world.

“Grateful for my wife, family, friends, and Pastors for their love, prayers, and support. Thanking God for my health and trusting that this latest victory is final in Jesus’ name.

“Appreciating the gifted hands and minds of my doctors, Dr. Onyewu of the Center for Advanced Specialty Surgery, and Dr. Adenuga of Euracare and the teams that support them.

“We have the victory yet again. Now and forever, in Jesus’ name.

“And we know that all things work together for good to those who love God, to those who are the called according to His purpose.” – Romans 8:28″

 

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Baigewallet Signs Nollywood Actress, Bimbo Ademoye, As Ambassador

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Digital financial service platform, Baigewallet, has signed Bimbo Ademoye, a celebrated Nollywood actress and content creator, as its Brand Ambassador.

Known for her exceptional creativity, acting prowess, and pleasant personality, Ademoye epitomises the values of innovation, creativity, and inclusivity at the heart of Baigewallet’s ethos.

As the Brand Ambassador, Baigewallet, in a press statement made available to LEADERSHIP, said Ademoye will assume a pivotal role in championing Baigewallet’s products and services while advocating for enhanced financial literacy, a culture of improved savings, and heightened inclusion for women.

“She will actively engage with Baigewallet’s diverse audience across multiple platforms, including dynamic social media campaigns, community events, and educational initiatives. Furthermore, she will collaborate closely with Baigewallet’s team to craft innovative strategies to enhance user experience and improve adoption,” the company added.

Baigewallet, therefore, reaffirmed its unwavering commitment to driving financial innovation and empowering individuals to flourish in the digital era.

 

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