Note 5 - Relates party transactions
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On June 29, 2012, an investor group which included a wholly-owned subsidiary
[Sony Corporation of America] of Sony Corporation completed its acquisition of EMI Music Publishing. To effect the acquisition, the investor group formed DH Publishing, L.P. (“DHP”
which acquired EMI Music Publishing for total consideration of 2.2 billion U.S. dollars. Sony invested 320 million U.S. dollars in DHP, through Nile Acquisition LLC, for a 39.8% equity interest. Nile Acquisition LLC is a joint venture with the third party investor
[Michael Jackson Estate] of Sony’s U.S. based music publishing subsidiary
[Sony/ATV] in which Sony holds a 74.9% ownership interest. In addition, DHP entered into an agreement with Sony’s U.S. based music publishing subsidiary
[Sony/ATV] in which the subsidiary provides administration services to DHP. Sony accounts for its interest in DHP under the equity method. DHP was determined to be a variable interest entity as described in Note 23.
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Note 23 - Variable interest entities
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Sony’s U.S. based music publishing subsidiary
[Sony/ATV] is a joint venture with a third-party investor
[Michael Jackson Estate] and has been determined to be a VIE. The subsidiary
[Sony/ATV] owns and acquires rights to musical compositions, exploits and markets these compositions and receives royalties or fees for their use. Under the terms of the joint venture, Sony has the obligation to fund any working capital deficits as well as any acquisition of music publishing rights made by the joint venture
[Sony/ATV]. In addition, the third-party investor
[Michael Jackson Estate] receives a guaranteed annual dividend of up to 23.1 million U.S. dollars through December 15, 2016. Based on a qualitative assessment, it was determined that Sony has the power to direct the activities that most significantly impact the VIE’s economic performance, as well as the obligation to absorb the losses of the VIE due to its obligation to provide funding to the joint venture. As a result, it has been determined that Sony is the primary beneficiary. At March 31, 2014, the assets and liabilities that were included in Sony’s consolidated balance sheets were as follows [currency : Yen in millions] :
Assets :
Cash and cash equivalents 6,495
Accounts receivables, net 3,315
Other current assets 26,226
Property, plant and equipment, net 1,330
Intangibles, net 61,269
Goodwill 15,570
Other noncurrent assets 6,395
Total assets 120,600
Liabilities :
Accounts payable and accrued expenses 42,329
Other current liabilities 9,498
Other noncurrent liabilities 3,136
Total liabilities 54,963
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In connection with the July 2013 refinancing of the debt obligation of the third-party investor
[Michael Jackson Estate] in the music publishing subsidiary described above
[Sony/ATV], Sony has issued a guarantee to a creditor of the third-party investor in which Sony has agreed to repay the outstanding principal plus accrued interest up to a maximum of 290 million U.S. dollars to the creditor should the third-party investor
[Michael Jackson Estate] default on its obligation. The obligation of the third-party investor
[Michael Jackson Estate] is collateralized by its 50% interest in Sony’s music publishing subsidiary
[Sony/ATV]. Should Sony have to make a payment under the terms of the guarantee, Sony would assume the creditor’s rights to the underlying collateral
[Michael Jackson Estate’s 50% interest in Sony/ATV]. The assets of the third-party investor
[Michael Jackson Estate] that are being used as collateral were placed in a separate trust
[MJ ATV Publishing Trust ? New Horizon Trust ? New Horizon Trust II ?] which is also a VIE in which Sony has significant variable interests. Based on a qualitative assesment, it was determined that Sony is not the primary beneficiary as Sony does not have the power to direct the activities of the trust. The assets held by the trust consist solely of the third-party investor’s
[Michael Jackson Estate’s] 50% ownership interest in the music publishing subsidiary
[Sony/ATV]. At March 31, 2014, the fair value of the assets held by the trust exceeded 290 million U.S. dollars.
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As described in Note 5, on June 29, 2012, an investor group which included a wholly-owned subsidiary
[Sony Corporation of America] of Sony Corporation completed its acquisition of EMI Music Publishing. To effect the acquisition, the investor group formed DH Publishing, L.P. (“DHP”
which acquired EMI Music Publishing. In addition, DHP entered into an agreement with Sony’s U.S. based music publishing subsidiary
[Sony/ATV] in which the subsidiary provides administration services to DHP (the “Administration Agreement”
. DHP was determined to be a VIE as many of the decision making rights for the entity do not reside within the entity’s equity interests, but rather are enbedded in the Administration Agreement. Under the terms of the Administration Agreement, the largest non-Sony shareholder
[Mubadala Development Company PJSC] has approval rights over decisions regarding the activities that most significantly impact DHP, including the acquisition and retention of copyrights and the licensing of songs. These approval rights result in Sony and the largest non-Sony shareholder
[Mubadala Development Company PJSC] sharing the power to direct the activities of DHP, and as such, Sony is not the primary beneficiary of the VIE. At March 31, 2014, the only amounts recorded on Sony’s consolidated balance sheet that relate to the VIE is Sony’s net investment of 324 million U.S. dollars and a net receivable balance of 12 million U.S. dollars. Sony’s maximum exposure to losses as of March 31, 2014 is the aggregate amounts recorded on ots balance sheet of 336 million U.S. dollars.
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