Hipgnosis Song Management is counting on chart-topping hits from the likes of Justin Timberlake, Nelly Furtado and the late Leonard Cohen to entice investors to its first music royalty-backed bond offering.
The $221.65m (R3.73bn) securitisation will repackage royalty payments, including publishing and sound recording rights, from a catalogue of music by several high-profile singers and songwriters.
The collection spans more than 950 songs and is valued at $341m, according to a Kroll Bond Rating Agency (KBRA) presale report.
KBRA has assigned the bonds a preliminary rating of A-, citing an experienced management team at London-based Hipgnosis and multiple administrators for the collection, such as Sony Music Publishing, Universal Music Publishing Group and Warner Music Group.
The top song in the catalogue is Cohen’s widely covered Hallelujah, according to KBRA.
We are seeing increased interest in music-rights deals from issuers and investors as more come to the market
— Chris Baffa, director, Kroll Bond Rating Agency
“We are seeing increased interest in music-rights deals from issuers and investors as more come to the market,” said Chris Baffa, a director at KBRA.
“If you went to the same market a year or two ago, the asset class wouldn’t have been as developed.”
Last month the Society of European Stage Authors and Composers, a performing-rights organisation, carried out a $335m whole-business deal backed by music fees from artists such as Adele and Neil Diamond.
The company, which was bought by Blackstone Group in 2017 for $1.125bn, sold similar securities in 2019.
Goldman Sachs Group is leading Hipgnosis’s bond sale, which is expected to price next week, according to people with knowledge of the matter. The bank declined to comment.
Hipgnosis plans to use the proceeds from the securitisation to help fund reserve accounts, pay transaction expenses, make distributions to equity investors and repay existing debt among other general corporate uses.
The bonds will pay interest on a semi-annual basis, with an anticipated repayment date in May 2027.
Music investment company Hipgnosis is the brainchild of Merck Mercuriadis, an industry executive who managed several top musicians, among them Elton John, Beyoncé and Guns N’ Roses, before founding the business in 2018. He still manages veteran composer and guitarist Nile Rodgers.
Bloomberg
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