SESAC Finance returns with a $335 million securitization that will issue notes secured by a pool of music affiliate agreements, existing and future license agreements, and certain equity interests and intellectual property.
SESAC Finance’s collateral includes existing and future music affiliate agreements, existing and future license agreements, plus certain equity interests and intellectual property.
The current transaction, SESAC Finance, Series 2022-1, will add collateral related to collections from Audio Network, a production music company that SESAC bought in July 2021. Audio Network creates original music that can be licensed to other creators—such as television and music production companies—and used on multiple platforms, according to Kroll Bond Rating Agency.
SESAC will use the proceeds from the deal to repay an existing credit facility of Audio Network, KBRA said. The rating agency added that it expects to affirm the ratings on the Master Issuer’s outstanding class A-2 notes, and withdrawing the ratings on the series 2019-1 class A-1 notes.
The pending deal follows up on a transaction from 2019, which itself followed a corporate transaction in 2017, when private equity funds affiliated with Blackstone bought SESAC from Rizvi Traverse Management. SESAC Finance, one of the largest performing rights organizations in the U.S., and CCLI Finance, are co-issuers.
Guggenheim Securities will be the sole structuring advisor and sole bookrunning manager, according to KBRA. SESAC Rights Management is on as the manager, with FTI Consulting as the backup manager.
KBRA expects to assign ratings ranging from ‘BBB-’ on the $30 million, 2022-1, A-1 notes, to ‘BB-’ on the series 2022-1, M notes.
Among the deal’s credit positives, KBRA noted, the performing rights organization has an experienced management team in an industry with extensive barriers to entry. Only four performing rights organizations representing songwriters and music publishers have been formed in the U.S. since 1914. SESAC itself contributed to the consolidation of the industry when it acquired Audio Network.
Audio Network focuses on musical composition and sound recordings for licensing from content creators, such as movie and television producers, according to KBRA.
Other aspects of the deal involved a more nuanced, or mixed, credit outlook. For instance, SESAC Music Affiliate agreements are shorter term—initially three years with automatic renewals, which doesn’t evenly match up with the duration of the notes. Yet the firm does offer renewal terms, and switching performing rights organizations can be costly and complicated for artists.
