Music rights firm Harmony is getting ready to situation $1.75 billion in bonds backed by a couple of million music copyrights.
The bond issuance is backed by the grasp recordings and compositions from artists comparable to Creed, R.E.M. and Phil Collins, American Banker reported, citing information from Kroll Bond Scores Company (KBRA).
In keeping with scores company Moody’s, the proceeds can be used to repay a bond issuance that Harmony accomplished in 2022. On the time, it was described as “the most important asset-backed securitization providing of music rights within the business to this point.”
The $1.75 billion refinancing is cut up into 4 parts:
- The collection 2025-1 A1 $100 million variable funding observe with variable rate of interest and a three-year time period, with the potential to increase for 2 additional one-year phrases (successfully a mixed five-year time period);
- The $400 million collection 2025-1 A2 observe, which has a five-year time period and glued rate of interest;
- The collection 2025-2 observe with proceeds of $550 million, a seven-year time period, and glued rate of interest;
- And eventually, Harmony Music Royalties collection 2025-3 observe, a $700 million 10-year bond with a set rate of interest.
MBW understands that this makes Harmony the primary music firm to situation long-dated debt backed by music rights, and that Harmony sees this as an opportune time to scale back its blended price of debt.
World funding agency Atlas SP is managing the deal, which is scheduled to shut on July 31, American Banker reported.
The music rights portfolio backing the bonds was valued at $5.12 billion as of the final day of 2024, in accordance with an evaluation by Virtu World Advisors LLC, as cited by Moody’s. About 60% of the property behind the debt issuance are recorded music royalties, whereas 40% comes from publishing royalties, Moody’s mentioned.
The scores company gave the bonds a rating of A2 (upper-medium grade, low credit score threat), the company’s third-highest scores tier.
Moody’s cited “the top quality of the collateral backing the notes which incorporates a big, seasoned catalog of music royalty streams that’s extremely diversified by artist, style and classic,” in addition to “the sturdy world music business fundamentals mirrored within the continued income development, owing to the wholesome development in streaming and favorable statutory royalty charges.”
“The collateral backing the notes… contains a big, seasoned catalog of music royalty streams that’s extremely diversified by artist, style and classic.”
Moody’s
Moody’s additionally cited the bonds’ “comparatively low loan-to-value ratio of 51%.”
“The diversification of the portfolio reduces the reliance on particular person artists/songwriters. As well as, greater than three quarters of recorded music catalog money flows are from copyrights which can be greater than 10 years outdated, that are much less risky and extra predictable,” Moody’s mentioned.
American Banker reported that KBRA issued an A+ ranking on the debt (excessive credit score high quality, low likelihood of default), its third-highest ranking tier.
Harmony’s newest ABS transaction follows an $850-million issuance in October final 12 months (five-year notes maturing in October 2029), a part of which was used to purchase a $217 million catalog from Latin music famous person Daddy Yankee.
Whereas asset-backed securities (ABS) have lengthy been part of the monetary world, they’re a comparatively new arrival within the music rights house, quickly gaining reputation over the previous a number of years.
Blackstone-owned Hipgnosis closed a $1.47-billion ABS transaction final fall, which the corporate mentioned can be used to “repay present debt in full and assist future acquisitions.”
Different latest ABS offers within the music rights world embrace a $500 million issuance to funding large KKR by HarbourView final month; a $360 million issuance by Affect Media Companions this previous January; a $266.5 million issuance by Kobalt in March of final 12 months; and an $80 million issuance by indie music rights-focused Duetti final October.Music Enterprise Worldwide
