Unsettled: does Warner hold 60% of Chocolate City?

Status: unsettled. Re-checked on 24 September 2026 against the full text of the court judgment, every Warner Music Group annual report from 2019 to 2025, and the National Archives case law index.

What changed hands on 27 March 2019 was money and distribution, not equity. WEA International Inc, part of the Warner Music group, signed a “Facility Agreement in respect of USD1,832,500 Convertible Term Loan Facilities” with Chocolate City Limited, a Nigerian music company. Chocolate City drew USD 1,700,000 of it. The loan falls due in full with accrued interest on the maturity date, defined as sixty months after financial close, unless WEA instead elects to convert the outstanding amount into shares in Chocolate City. A London judge confirmed in November 2023 that Chocolate City cannot take that election away by repaying early.

Whether WEA made the election is still unknown.

What the court file establishes

The judgment is Chocolate City Limited v WEA International Inc [2023] EWHC 2874 (Comm), claim CL-2022-000643, handed down by Mr Justice Foxton in the Commercial Court in London on 16 November 2023. Hogan Lovells International LLP acted for Chocolate City, Dentons UK and Middle East LLP for WEA. The full text is public on the National Archives case law service. Earlier versions of this record relied on reporting of the ruling, not the ruling itself.

On 8 September 2022 Chocolate City served a prepayment notice asserting a right to repay the loan with interest by 20 December 2022. WEA replied on 13 September that no such right existed. Chocolate City applied for summary judgment, WEA cross-applied, and Foxton J found that WEA “acquired a convertible loan, which … 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.” Chocolate City, he held, “does not have a real prospect of establishing a right to prepay the loan.”

The three agreements that made up the 2019 transaction

The judgment treats the facility as one limb of a single transaction. The distribution arrangement and the equity option are separate instruments under different governing laws, and coverage routinely collapses them into one another.

A third exit has gone almost unreported. Clause 7.2 provides that WEA “may (but is not obliged to)” discuss converting all or part of the loan into an unrecouped balance under the distribution agreement, with the exclusivity term extended until it is recouped. There were three landing points at maturity, not two: cash, shares, or a rolled-up distribution debt on a longer exclusive term.

Why the 60 per cent figure is less settled than the coverage suggests

The judgment mentions 60 per cent exactly once, and not in an operative document. At paragraph 30 the judge set out pre-contractual material WEA relied on. It includes a non-binding letter of interest dated 15 August 2018, signed by Chocolate City and Warner Music Inc, proposing financing “in the form of a convertible note for an aggregate amount of $1,500,000 … which … shall be payable in full or convertible into 60% of the equity interests” of Chocolate City. A non-binding term sheet dated 17 January 2019 calls it an investment “by way of secured loan, convertible into equity in the Company at the Lender’s option at the Maturity Date”, with no percentage. Such material could establish commercial purpose, the judge said, “although not to interpret its terms”.

The executed Option Agreement, as described in the judgment, carries no percentage either. It converts “Outstanding Obligations”, all sums due and unpaid at the option exercise date, into “Shares in the authorised capital of the Borrower”.

The judge flagged the gap himself. Chocolate City argued no conversion right could have been intended because it was never obliged to draw the full facility and did not. At paragraph 26 he called that a real “drafting curiosity of the transaction documents, and the scope for argument as to the amount of equity for which outstanding debt can be converted on the Maturity Date if something less than the full amount available under the Facility is drawn down”, and at paragraph 27 recorded that neither party had invited him to decide it.

A non-binding letter attached 60 per cent to a $1,500,000 note. The executed facility was for $1,832,500. The borrower drew $1,700,000. No public document states the conversion ratio for a partial drawdown. The 60 per cent in this record’s own headline is the number the market settled on, and the documents do not support stating it as fixed.

What Warner has told the market, and when

Counts taken by fetching each filing in full from EDGAR on 24 September 2026. The three that mention the label carry the same sentence each year: Warner had “recently invested in one of Nigeria’s leading music entertainment companies, Chocolate City, and music from this influential independent company’s recording artists and songwriters will join our repertoire and receive the support of our wide-ranging global expertise, including distribution and artist services.”

It says invested. It does not say acquired, it names no shareholding, and it describes the artist-facing side as distribution and artist services. The FY2023 filing went out five days after the judgment and says nothing about it. The silence afterwards is not a finding: Africori, the South African distributor Warner acquired outright, appears zero times across all seven filings.

The tension in the 2019 announcement

The partnership was announced on 28 March 2019, the day after the facility was signed. The announcement text said Chocolate City artists would join Warner Music’s repertoire with distribution and artist services via ADA, Warner’s independent label services division, that the deal included “a strategic, reciprocal marketing agreement with WMG South Africa”, and that Warner would “financially invest in Chocolate City to assist in its mission of signing and developing promising local talent”. Co-founders Audu Maikori and Paul Okeugo were named as continuing to lead the company. Warner’s own newsroom no longer serves a page for it, and no archived capture was located.

Reporting published on that announcement carried a different line: two people close to the deal said that while there was financial investment, Warner was not taking an ownership stake in the label at this time. That page now refuses requests from this desk; the wording is quoted from an archived capture.

The two are reconcilable on a strict reading: a convertible loan is debt, and an option over shares is not a shareholding. The tension is still worth recording, because the day before that briefing a Warner subsidiary had signed a secured instrument granting it an unfettered and irrevocable discretion to take shares.

What this means for artists

Nothing here moves a single artist’s masters. The question is who owns the company that owns the masters. If WEA converted, an artist’s contractual counterparty does not change, the shareholder above it does. This desk’s separate record on Blaqbonez shows an unbroken Chocolate City phonogram credit from July 2018 through 2026, straight through the dispute.

The part that touches artist money most directly is the distribution agreement, not the equity option. ADA sits between the label’s recordings and the streaming services, and its term extends automatically until the account is recouped. A label carrying an unrecouped distribution balance has less cash for advances, marketing and release support.

Conversion would be balance sheet relief, not a cash injection: exercise discharges the loan and releases the security, so the debt disappears and a block of the equity goes with it. Repayment does the opposite: the founders keep the company and the cash goes out. For anyone signing to a label with a convertible instrument above it, the useful question is not “who owns you” but “what happens to my agreement if the lender converts”, and whether the contract carries a change of control provision.

What is not established

• The outcome. No source establishes whether WEA served an option notice, exercised the option, accepted repayment, took the clause 7.2 route into an unrecouped distribution balance, or settled.
• The calendar maturity date. The facility defines maturity as sixty months after financial close, and financial close turns on a lender notification the judgment does not date. Reporting has placed maturity in 2024. The judgment does not.
• The percentage. 60 per cent appears only in a non-binding 2018 letter of interest, for a smaller sum than was signed or drawn.
• Any appeal. Searches of the National Archives case law index on 24 September 2026 for “Chocolate City”, “Chocolate City Limited”, “WEA International” and claim CL-2022-000643 return the 16 November 2023 judgment and nothing later. Reporting at the time noted that chief executive Abuchi Ugwu did not respond to a request for comment on whether an appeal or settlement talks were under consideration.
• The corporate structure. The named borrower is Chocolate City Limited. Its relationship to Chocolate City Group and Chocolate City Music is not established by any registry document. Nigeria’s Corporate Affairs Commission has no public search interface.
• Whether the ADA Distribution Agreement is still in force. No source says.
• Any artist terms. No Chocolate City artist agreement was obtained, and no royalty rate, advance, term or reversion clause appears in any document cited here.
• Any statement from either party. No statement by Warner Music Group or Chocolate City on the outcome of the facility was located.

Re-check log

24 September 2026. The full judgment was obtained and read for the first time and is now the lead corroborating document here. All previously cited sources returned HTTP 200, though one resolves without rendering a readable body to this desk’s fetcher, and no claim here rests on it. Warner’s Form 10-K filings for FY2019 through FY2025 were fetched in full and searched, and the case law index was checked for an appeal. Nothing resolves the position after maturity, so the status stays unsettled.