Recognition Music Group – the Blackstone-owned firm that now controls the portfolio of music previously often known as Hipgnosis – is planning a $372-million issuance of five-year bonds backed by its multi-billion-dollar music catalog.
That catalog consists of recorded music and/or publishing rights from artists such because the Crimson Scorching Chili Peppers, Journey, Justin Bieber, and Shakira.
Proceeds from the transaction will probably be used to fund Recognition’s reserve accounts, repay present debt, cowl sure transaction bills, and go in direction of common company functions, in line with a report from Kroll Bond Score Company.
Kroll notes that the Recognition catalog’s property embody these from the “legacy” Hipgnosis Songs Fund (HSF) portfolio.
Based on Kroll’s report, based mostly on a third-party valuation as of March 31, the catalog backing Recognition’s ABS transaction was price USD $2.95 billion, inclusive of $340.8 million in further property that Recognition added to it.
This implies the portfolio that till not too long ago was often known as Hipgnosis Songs Fund (HSF) was price $2.61 billion as of the tip of March (excluding $340.8 million in further property added by Recognition.)
It additionally means that the HSF music rights portfolio constructed by Merck Mercuriadis has been quickly rising in worth since funds managed by Blackstone acquired it in the summertime of 2024.
As not too long ago as final October, KBRA valued the HSF portfolio at $2.36 billion; Blackstone’s buy value for HSF a number of months earlier implied a price of $2.2 billion.
Based on KBRA’s evaluation, Recognition’s portfolio of round 47,000 grasp recordings, compositions, and associated property consists nearly totally of catalog. The weighted common age of the music is round 21 years, with 76% launched greater than 10 years in the past and 96% launched greater than 5 years in the past.
KBRA describes it as a “massive, diversified catalog with globally acknowledged songs and artists,” however notes that its income is pretty concentrated: The highest 10 songs within the portfolio account for round 11% of the royalties.
The rights within the portfolio are administered by quite a few publishers and CMOs, amongst them Kobalt, Sony Music Publishing and Common Music Publishing Group.
KBRA gave the bond issuance a score of A, which is its third-highest rating (excessive credit score high quality, low threat of default). It additionally famous that it expects to improve its score on the earlier bond issuance from Recognition, from A- to A.
“Streaming revenues proceed to characterize a constructive tailwind to business progress and catalog cashflow, whilst streaming progress charges have begun to decelerate in sure markets.”
KBRA
That earlier issuance of $1.47 billion in music asset-backed bonds closed final November, and has made Recognition/Hipgnosis one of the prolific issuers of ABS within the music business. Its newest bond issuance makes use of the identical music portfolio as collateral.
“Streaming is among the main drivers of music business progress and represents nearly all of royalty cashflows generated by the [Recognition] catalog,” KBRA analysts wrote.
“Streaming revenues proceed to characterize a constructive tailwind to business progress and catalog cashflow, whilst streaming progress charges have begun to decelerate in sure markets.”
The report cited IFPI knowledge exhibiting that streaming income from recorded music elevated from $1.8 billion, or 14% of all recorded music income, in 2014 to $20.4 billion, or 69% of all recorded music income, in 2024.
“Streaming progress declines are usually not uniform throughout all markets, with saturation having extra of an influence on developed markets versus undeveloped markets. Even in markets that could be reaching a degree of subscriber saturation, that is offset to some extent by usually constructive pricing developments,” KBRA added.
Recognition’s newest debt issuance comes amid rising reputation of asset-backed debt amongst music firms.
Most not too long ago, Harmony closed a $1.76-billion ABS issuance backed by a portfolio of recorded and publishing rights from artists reminiscent of The Beatles, Beyonce, Bruno Mars, Daddy Yankee, Ed Sheeran, Think about Dragons, Kiss, Michael Jackson, Pink Floyd, R.E.M., Rihanna, Taylor Swift, The Rolling Stones and plenty of others.
It was Harmony’s fourth securitization providing and was described as “the most important and longest tenured asset-backed time period securitization of music rights thus far,” with bond phrases starting from 5 to 10 years.Music Enterprise Worldwide
