Hipgnosis Tune Administration (HSM) is formally getting ready to make a transfer into asset-backed securitization with a $222 million bond providing.
HSM’s arrival into the music-bond area – the place the likes of KKR and Northleaf Capital Partners have debuted in current months – got here to mild in a formal release and report from the Kroll Bond Score Company (KBRA). Hipgnosis Tune Administration, it needs to be clarified on the outset, is the Blackstone-powered “funding advisor” of the Hipgnosis Songs Fund, or the publicly traded (LON: SONG) entity that’s bought all method of music IP throughout the previous a number of years.
But it surely’s Hipgnosis Tune Administration that’s made headlines for closing high-profile catalog offers in 2022; Hipgnosis Songs Fund’s gross debt has for a while been maxed out at $600 million. And amid rising charges, the Fund’s mortgage curiosity hiked from $7.3 million to $20.4 million throughout the 12 months ending on March thirty first.
Execs in the corresponding earnings report confirmed that the enterprise, apart from shelving any plans to difficulty extra shares but, was “within the technique of a assessment of its leverage construction with a view to decreasing rate of interest threat and management prices.”
Again to Hipgnosis Tune Administration’s securities, nevertheless, KBRA, having additionally evaluated the talked about KKR and Northleaf Capital bonds, has issued an A- score to the providing, which consists of recorded and publishing royalties from some 950 songs.
Mentioned songs span “5 sub-catalogs from prime artists and songwriters” reminiscent of Justin Timberlake, Nelly, and Leonard Cohen. Furthermore, the catalogs’ complete worth is $341 million, in line with “an unbiased third-party valuation agency” evaluation cited by KBRA.
This agency calculated the sum by utilizing “a reduced money circulate technique based mostly on money circulate forecasts and a reduction price of seven.0%,” and the valuation doesn’t “give any credit score to income generated by title, picture, and likeness (NIL) rights,” KBRA made clear.
Bloomberg recognized the initially highlighted $222 million determine (particularly $221.65 million) for the bonds’ sale, whereas KBRA’s launch notes that curiosity can be paid on a semi-annual foundation forward of an anticipated reimbursement date in Could of 2027.
Hipgnosis’ bond providing is anticipated to be priced subsequent week, and in the long run, it’ll be value following the current pattern of utilizing music royalties to again securities.
It bears acknowledging on this entrance that SESAC (a subsidiary of the aforementioned Blackstone) final month executed a $335 million “whole-business deal,” in line with Bloomberg, “backed by music charges from artists.” The PRO “bought related securities” three years again, the identical supply indicated.