New issuer Concord Music Royalties is drumming up interest in its first asset securitization deal, a $1.6 billion transaction secured by royalties tied to a music catalog from a range of artists, including Creed, R.E.M., and Genesis.
The catalog itself is valued at $4.1 billion, easily the largest portfolio value among the securitization industry's recent music royalty transactions, according to Kroll Bond Rating Agency (KBRA). The deal is also significantly larger than other securitizations over the last year that were backed by music royalties, the largest of which was a $732.5 million offering by
Apollo Global Securities acted as structuring agent on the transaction.
The Concord Music deal is split into a $150 million class A-1 tranche and a $1.5 billion Class A-2 piece, both rated single-A+. That compares with Hi-Fi Music's offering and a $303.8 million music royalty-backed transaction by Crescendo were each rated single-A and respectively completed last February and December, before inflation and interest rates climbed steeply.
The latter two deals carried loan-to-value ratios (LTVs) of 65%, as did the $221.5 million by Goldman Sachs-led Hipgnosis Music Assets, which priced in August and whose class A notes were rated lower, at single A-.
The current Concord Music deal carries a much lower LTV of 45%. Neither the lead underwriters nor price talk for the Concord offering were unavailable as of press time. The Hipgnosis deal priced for a spread of 310 basis points, at the low end of price talk between 310 and 325, for a coupon of 5% and a yield of 6.09%, according to Finsight.
Concord Music was founded in the early 1970s as Concord Jazz and the company focuses on acquiring music catalogs and theatrical performance rights from artists globally. The transaction will be collateralized by royalties from a music catalog comprising more than one million assets from top artists and song writers in the U.S. and globally.
KBRA notes in its November 29 presale report that a third party valuation agent provided the catalog's valuation using a discounted cash flow method based on cash flow forecasts. It used a discount rate of 8.25% for released music portion of the catalogue, and 11.75% for the much smaller options and futures portion.
