The Hipgnosis Song Management will debut on the asset-backed securities (ABS) market by sponsoring a $221.6 million, secured by a catalog of more than 950 songs from five sub-catalogs representing top artists and songwriters.
Hipgnosis Music Assets, 2022-1, the issuer, will include royalty payments from publishing and sound recording rights, according to Kroll Bond Rating Agency, and will use proceeds to pay its equity investors. Some of the note proceeds will also fund reserve accounts, pay certain transaction expenses and repay existing debts, and meet other corporate purposes.
The catalog underpinning the deal is valued at about $341 million, using a discounted cash flow method, based on cash flow forecasts and a discount rate of 7.0%, KBRA said.
The valuation does not include any credit for name, image or likeness rights, the rating agency said in a pre-sale report. Hipgnosis Music Assets, 2022-1, will issue just one class of notes, and KBRA expects to assign that class a 'A-' rating.
The catalogs sheer size is a credit positive, according to the rating agency. Hipgnosis Music's sponsor, Hipgnosis Song Management, represents some of the world's highest profile and culturally significant artists, including Nelly, Shakira and Richie Sambora, according to its Website. The company's experience as a music investment group is also a credit plus, as is the assignment of backup manager duties to FTI Consulting.
FTI has industry experience and has served in the same role on other music royalty ABS securitizations, the rating agency said.
The notes in Hignosis Music Assets, 2022-1, have an anticipated repayment date of May 2027, and a final maturity date of May 2062.
