MJ Sony/ATV shares sold: the never seen before Trigger Clause and the Sony purchase option

Rummaging through the old MJ financial lawsuits, now forgotten in the depths of the court archives and no longer “under seal”, we finally found the documents we were looking for such a long time. We knew these documents to be the key for understanding and giving the right interpretation of Michael Jackson’s words when he was telling us: “They want my catalog” “…. there is a big fight for it”. On too many occasions he addressed these issues.

But before approaching the documents and showing “the numbers people have played on him”, let’s face finally for good, how misleading the media were towards MJ.

Fabricated headlines that became a relentless smear campaign that mockingly wanted him ruined, and on the verge of bankruptcy since the beginning of the new millennium. Everybody can remember headlines such as “Jacko: Advisers made sure he wasn’t Dead” (published on FoxNews and signed by R. Friedman) trumpeting that “Michael Jackson will agree to give up a part of his most prized asset for 200 million to Sony Corp”.

The testimony of Daniel Groppel – then Managing Director of Fortress Corporation – while reviewing an exhibit related to the Prescient lawsuit, was enlightening reading.

The document was nothing less than a negotiation that took place toward the end of December 2005, when MJ’s team asked for an extension of time in order to stop the Bank of America refinancing. Fortress agreed, in exchange for a 1% fee of the total loan balance fee.

Here it must be clear that Fortress, though purchased in May 2005 Bank of America loans, had not yet refinanced the loan itself, so in order to give an extension for it, all conditions had to match with the Bank of America package of collaterals.

Bank of America’s conditions was pretty strict and the loans were extremely over-collateralized (MJ had all his assets pledged, Neverland included). Part of the conditions in case of MJ defaulting on the loans was the ability to put the Sony/ATV loan – payable by Sony – for the amount of the loan itself, which was $200 million. Then Sony or a third-party would have paid the difference of the catalog value to MJ, as per the clauses described in the SONY/ATV Operating Agreement. So Fortress, in order to execute the 60 days forbearance agreement requested by MJ, was going to get the extension of Sony’s credit support for the same extended period of time.

 You don’t have to be a financial expert to understand that MIJAC was not needed as collateral for this transaction. The 50% of Sony/ATV interests would have been more than enough to secure the loan. And it just so happened to be Rob Wiesenthal – Chief Financial Officer of Sony Corporation of America – who was the guy that gave the guidelines to Fortress in respect of taking MIJAC as extra collateral. After losing the control in Bank of America through their friend Koppelman,  and with MJ’s new advice of Ron Burkle and his legal team – Sony knew a change of path was needed. So they played damage control – keeping MJ tied up through Fortress and somehow, in the case of MJ defaulting, still hoping to put their hands on the MIJAC catalog.

Here is the “Put Option” clause as per Sony/ATV Operating Agreement:

put option.PNG

“Put Exertion” Agreement Jan 31, 2006

The media divulged messy and “selective” news. In this respect, one wonders what kind of document was delivered to reporters – and above all, who instructed to give away these crappy masterpieces that were worthy of winning the Pulitzer for the trashiest journalism of the decade? If ever there was one.

The documents show that what the media have been reporting since 2002 about MJ’s investments -from Bank of America to Fortress – are lies that have been deliberately released to mislead the public about MJ as a person. All of the narrative about this clause is approximative and manipulated, and has been a set-up since the beginning.

The point is that Michael Jackson was a target, and Sony a powerful group not in the business of exclusive gossip headlines, whilst Michael Jackson was the biggest victim in history of that type of journalism.

To confirm the above, read what happened on the morning of April 13, 2006. Fortress had not even made the loan disbursement – the closing of the transaction happened in the afternoon of the same day – but somehow, the press spread the news that Michael Jackson had to have the new loan done, and had to agree with Sony the sale of part of his 50% stake in Sony/ATV. Lawyers dealing with the Prescient lawsuit knew nothing about the turn of events: they had to interrupt the deposition because there was no such document within the court papers.

“The infamous “Sony Purchase Option” that Sony allegedly wanted in exchange for guaranteed support”

The executed copy of the Credit and Security Agreement between Fortress Credit Corp and New Horizon (the Trust owner of MJ’s publishing interests) is a 35-page document consisting of five main articles and 20 sub-sections. The first article describes the “definition and interpretation” of the document.  And there we have the definition, and what is referred to as the Sony Purchase Option:

sony-purchase-option

The Section is part of the article no. 7 that describes the procedures for the “Transfer of Membership Interests” of Sony/ATV.  Again, the undertaking is the same as the one we showed you above – this time coming into force 3 months after the date of loan disbursement, until the end of the period. It started at the end of July because from  May 2 up to July 30, 2006, it was Michael Jackson’s turn to have the option to buy Sony shares in Sony/ATV. This is called the baseball arbitration.

The “put option” was inserted at the beginning of Sony/ATV full administration of ATV catalog, described in the “operating agreement” as the moment in which the two parties could begin to exercise the “buy out” option. It has been inserted in the third amendment of the “Operating Agreement” on December 23, 1998, and regardless of the dates written on it, it was subjected to amendments each time management or investment changed.

amenment-31

amendment3-5As you can see above, those dates had been set in 1998 and it was for this reason that since 2002 Michael Jackson was looking for financial solutions to carry out the acquisition of Sony shares. The “put option” is exercised by both parties for a limited period of time, and is there in order to protect all parties’ interests.

The purpose of keeping up the undertaking to the end of the loan was to offer additional collateral – secured in case of a default under the refinancing, at a price approximately equal to the outstanding amount of the loan. Also, Sony – in respect of Sony/ATV – had to guarantee payments to MJ of 6 .5 million per year, and also undertake to provide up to 2 million per year – in each case – to service the interest payable on the loan to MJ. And just to set the record straight, and avoid any possible misunderstanding – that was Michael Jackson’s entitled money and revenues. Not an act of goodwill by Sony.

city-comment

Memorandum White & Case in respect of the Fortress refinancing

The genesis of all of the above comes from the “Sony/ATV Operating Agreement”- its conditions written in 1995 – which stipulates that associates must guarantee each other investments in order to protect the company interests.

Here is how the agreement starts:

sonyatv-restrictionBut what MEDIA never divulged was the reason WHY Sony/ATV had such a huge corporate debt, and in which fashion the revenues were being distributed. Sony/ATV had a high debt at the corporate level due to the huge administration costs invoiced by Sony which depreciated the value of the assets. And despite having more than 100 million in cash most of them were distributed to Sony, and “sucked out” – as one of the lawyers worded – by Mr. Koppeland and many other people. Groppel confirmed to be aware that he knew” A lot was going on in Sony”.

The 1995 “operating agreement” and its relevant amendments give the real details of the deal and show us that Sony never had a purchase option that they could exercise no matter what. It was always for a restricted time and in case of not execution, the same option would turn automatically to MJ and vice versa (in the context of the operating agreement).

Also, you have to consider that the value set in the “put clause” is a sort of first “auction” price to which, in case of the opening of the transaction, subsequent rules are applied in order to get at the real and commercial value of assets. In 2006, Fortress assessed the Sony/ATV deal’s value as oscillating between 1 billion and 1.6 billion – and maybe more if management costs billed by Sony were not so huge (about 250 million of administration costs per year).

It’s also understandable why both parties never purchased each other at that time. In fact, during the 10 years partnership, the company’s value grew starkly – and neither Sony nor MJ had the chance to pay each other such big amounts.

MJ suffered big losses due to bad managers, who helped themselves into his accounts, stealing and investing in questionable business endeavours (Myung-Ho Lee stole millions and lost MJ a lot of money by suggesting investments like Tickets.com Inc.; then Dieter Wiesner with improbable ventures such as Mystery Drinks and clotheslines that never came to life (just to give a few examples). Not to mention the criminal trial that exhausted MJ’s vital energy and personal money.

On the other hand, Sony was in financial distress since 2002 and had another deep crisis in 2008.

http://www.forbes.com/2003/11/05/cz_bf_1104sony.html
https://www.theguardian.com/business/2008/dec/09/sony-job-cuts

As you can see, we refer to MJ’s financial transactions as investments – not loans, which is what this was. When Robert Holmes à Court sold ATV Music to Michael Jackson, documents show that MJ arranged a 30,000,000 (US) loan from Chemical Bank to facilitate the purchase, before transferring the ownership of Northern Songs to Nassau in the Bahamas – where two bankers were appointed to the board. The whole ATV group was acquired (including Bruton Music Ltd., ITC Filmscores Ltd., Marble Arch Music Ltd., and the long-established publishers, Lawrence Wright Music Co. Ltd.). There is no clear documentation of the total price paid, although press reports indicate Usd. 47 million.

That shows how money from these transactions was used to make investments and pay corporate bills, lawyers, employees, offices and business expansions – not to buy personal cars or shopping antiques, as the MEDIA and some “so-called” friend claim; the shopping  was paid with the royalties he deserved after 45 years of hard work. But the Sony/ATV structure was harmful to his finances from all points of view, and his money somehow kept disappearing.

To conclude with the “operating agreement” subject, we’d like to approach the Sony 1995 “trigger clause” – the one that allowed Sony to finally take the whole of Michael Jackson’s 50% share in Sony/ATV.

The trigger procedures are explained in “The operating agreement of Sony/ATV”, Article no.7 “Transfer of Membership Interests” at Section 7. 8, and offers us a key to understand that what Sony claim (as per their press release….) might have been called out by the Michael Jackson Estate instead.execise-triggerActually, Section 8 of the same Article no 7 “Transfer and membership Interests”, describes the “Exit Strategies”, and states that – starting from ninety months after the company commenced to administer the ATV catalog  (which only happened in 1998, due to MJ’s previous agreement with EMI), or else the tenth anniversary of the “operating agreement” date – either the Sony Music Publishing Members or MJ (or MJ’s Estate in the case MJ’s early death) shall have the right to notify the other Members that they desire to implement an exit strategy from the deal. A First Trigger Notice may be given upon MJ’s earlier death if (i) i MJ owns at least a 20 percent Membership Interest at the time of his death, and has not taken any actions to nominate a successor – a  reason which should cause his estate to be unable to validly elect his successor, (ii) ii.PNGFeel free to read and form your own opinion:

The Sony emails leaked in 2014 revealed that Sony was considering to eventually sell the Sony/ATV music publishing unit. But after having read the documents behind the final decision, those emails take on a completely different meaning, and it is clearly evident that they were already in merging preparations with the MJ Estate executors – making clear reference to the confidentiality of the negotiations, because branca-do-not-sellMJ’s corporate investments passed on from Fortress to Barclays (refinancing the 50% Sony/ATV interests) and HSBC (refinancing MIJAC catalogue), then in December 2010 – only the facility involving Sony/ATV interest – to Union of Swiss Banks. We have been told by the Estate that the MIJAC loan has been completely reimbursed, so we just hope this is true. Seen as “the operating agreement” and the “put option” work, it would also be possible that when coming to the end of the UBS facility, it was Branca who opened the transaction to request Sony purchasing the loan, and negotiating under the term of the trigger arbitration.

This screenshot could indicate a confirmation of the above reflection. With collateral worth a billion against a loan request of 300 million – with or without Sony’s undertaking – it’s difficult to see any kind of possible foreclosure on the security. Indeed, it would have been enough to negotiate new facility conditions with another financial institution.

16358790_10154040723935870_108438418_n1

And this video might tell us and confirm that actually the estates executors and Sony orchestrated a PR sham in the media, just to divert attention from the fact that, actually, this ownership passage had been written since MJ passed away.

16425216_10208099342344448_75224721_nEither way, things have opened and developed. Since MJ’s death, no suitable successor has been appointed – Mr. Branca is an executor, not an Estate heir. Plus, his nomination – if it ever would have happened – would have created an additional conflict of interest. Plus the fiscal problems regarding tax fines generated by the undervaluation that the estate accounting team made in connection to MJ’s likeness and assets at the time of his death. So it doesn’t matter from what perspective you want to look at this whole business, the executors are always behind the motivations.

But we leave that for a future generation to decide.

activist

 

14 thoughts on “MJ Sony/ATV shares sold: the never seen before Trigger Clause and the Sony purchase option

      1. Hi, I am a spanish fan and I would really appreciate if this is translate to spanish because my english is very limitated. Is important also because much more fans would get access to this very important information and let them open their eyes about everything is going on

        Liked by 1 person

  1. Forget Spanish, how about plain English lol. It’s surely excellent content but so detailed and hard to understand. A bullet list of points or summary few paragraphs for the laymen would be appreciated at the head of the article.

    Liked by 1 person

  2. Pingback: jackson.ch
  3. I really believe that Branca should be arrested immediately for murder, theft, false claims on MJ’s worth to IRS..that’s fraud. This evil needs to be taken down…

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s