Chocolate City risks potential loss of 60% shares

Founded in 2005 by the trio of Audu Maikori, Paul Okeugo, and Yahaya Maikori, Nigerian music company Chocolate City faces the potential loss of up to 60 per cent of its equity to partner WEA International, a subsidiary of Warner Music Group (WMG) based in New York. The risk arises from a loan dispute between the two entities, as a commercial division of a High Court in London ruled against Chocolate City’s attempt to prepay a $1.7 million loan from WMG before its due date in 2024.

The court’s judgment upholds WEA/WMG’s right to opt for repayment with 60 per cent of Chocolate City’s shares, a decision that could have significant consequences for the Nigerian music powerhouse. The ruling concludes Chocolate City’s efforts to exit the loan obligations early, preventing the lender from choosing a 60 per cent share conversion to offset the loan. The loan, secured in 2019, was slated for repayment or conversion into a substantial portion of Chocolate City’s equity.

Judge David Foxton emphasized that prepayment before the due date was not foreseen in the agreement signed by the parties. This ruling effectively grants WEA/WMG the discretion to accept payment with full interest at the due date or convert the loan into 60 per cent of Chocolate City’s shares. The court’s reliance on pre-contractual documents and correspondences provided insights into the agreement’s intricacies, revealing the potential for equity conversion at the end of the loan term.

Initially announced in 2019, the partnership between Chocolate City and WMG promised global reach for African artists and new opportunities for regional superstars. However, the recent legal dispute has added uncertainty to the collaboration.

Chocolate City has been a home to recording artists 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, Kahli Abdu, VHS Safari, and more. Currently, artists on the label include Tariq, Noondave, YoungJohn, Blaqbonez, CandyBleakz, and MajorAJ.