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On the finish of final month, Harmony was reported to have begun a course of that may see it change into the newest massive music firm to launch a bond providing through securitized royalties from copyrights.
Based on a Bloomberg report, monetary large Apollo World Administration was promoting a $1.65 billion bond backed by music rights from Harmony’s catalog, which might mark the music firm’s first securitization.
On Thursday (December 8), Harmony confirmed that it has efficiently priced $1.8 billion of senior notes secured by what it says is a “significant slice” of its catalog of sound recordings and songs.
Based on a press launch, Apollo, via its Capital Options enterprise, structured the ABS (asset-backed securities) transaction and fashioned an investor syndicate led by Apollo-managed funds.
JP Morgan served as a co-structuring agent of the transaction. Harmony says that proceeds from the issuance will likely be reinvested to help the corporate’s progress in 2023 and past.
The transaction is claimed by Harmony to be “the most important asset-backed securitization providing of music rights within the trade up to now by way of each measurement of issuance and variety of belongings (over a million copyrights)”.
Harmony’s new five-year facility is backed by a catalog of greater than 1 million music belongings spanning a wide-range of genres, together with over 300 Grammy Award winners and greater than 400 recordings with Gold, Platinum, Multi-Platinum and Diamond Recording Trade Affiliation of America (RIAA) certifications.
Works within the securitization catalog alone embody songs and recordings by Phil Collins, Creedence Clearwater Revival, Daft Punk, Miles Davis, Danny Elfman, Evanescence, John Fogerty, Genesis, Think about Dragons, Isaac Hayes, James Taylor, Jewel, Joan Sebastian, 9 Inch Nails, Pink Floyd, Cyndi Lauper, Little Richard, Nikki Six, Otis Redding, R.E.M. and plenty of different superstars.
Harmony provides that its catalog is valued at greater than $4 billion, “leading to an approximate 44% loan-to-value ratio for the providing” and the notes are rated A+ by KBRA.
Harmony says in its press launch that its transaction “displays the rising worth of music copyrights and elevated curiosity from monetary establishments in music royalties as a long-term, annuity-like asset class”.
“The music trade is experiencing a interval of sustained growth, fueled by exponential progress within the world streaming market, new advertising and marketing platforms, elevated collector demand for vinyl data and, with the combination of recent applied sciences, diversified platforms for music commercialization,” provides Harmony. “These mixed components profit each legacy catalogues and new releases whereas driving artist and songwriter income.”
“Harmony has reached a brand new milestone in its personal evolution and for the broader world trade in pricing the most important music ABS transaction in historical past.”
Bob Valentine, Harmony
“Harmony has reached a brand new milestone in its personal evolution and for the broader world trade in pricing the most important music ABS transaction in historical past,” stated Bob Valentine, President of Harmony.
“I’m proud to assist lead an organization partnered with the astonishing depth and breadth of creative expertise that the works financed by this securitization symbolize. I’m additionally terribly grateful {that a} important variety of blue-chip monetary establishments have taken be aware of our success up to now and chosen to take part in our future.
Added Valentine: “As we proceed to higher place Harmony as a bellwether within the trade, our focus stays the identical: to raise the voices of artists and musicians utilizing the worldwide, impartial platform that we’ve got been assembling for years.
“We’re grateful to our financing companions at Apollo and JP Morgan who helped us develop a long-term capital resolution that displays the power of the portfolio we’ve got constructed up to now and additional validates our lively administration technique.”
“We’re happy to offer a tailor-made, versatile structured resolution that helps their continued progress.”
Bret Leas, Apollo
Apollo Accomplice and Head of Asset-Backed Finance Bret Leas, stated: “Harmony’s skilled administration group continues to construct a world-renowned catalog of belongings with diversification and money circulate traits nicely fitted to asset-based lending.
“We’re happy to offer a tailor-made, versatile structured resolution that helps their continued progress.”
“Having identified the Harmony Board and administration group for a few years, we’re happy to help their future success.”
Paul Sipio, Apollo Capital Options
Apollo Capital Options’ Paul Sipio, added: “This transaction leverages the dimensions of our funding platform alongside our rising Capital Options enterprise to originate, anchor and syndicate a complete financing resolution.
“Having identified the Harmony Board and administration group for a few years, we’re happy to help their future success.”
Immediately’s information comes simply over 12 months MBW informed you that monetary bonds had been about to change into a giant deal within the music enterprise.
That prediction got here true, time and time once more, over the previous 12 months, with a lot of headlines hitting our pages about music firms launching bond choices through securitized royalties from copyrights.
In December 2021, for instance, personal fairness firm Northleaf Capital introduced it was elevating $303.8 million by promoting Asset-Backed Securities (ABS) which might be supported by music rights – together with songs created by Pete Townshend for The Who, and by nation star Tim McGraw.
Based on Bloomberg, the securities can be supported by each publishing and sound recording rights, in addition to different revenue streams, throughout a complete of 52,729 songs.
These songs make up a piece of the catalog of Spirit Music Group; Spirit owns a complete portfolio of greater than 100,000 music belongings.
Our prediction got here true once more in February, when MBW reported that within the second half of October 2021, KKR – through its Chord Music enterprise – acquired a big portfolio of rights from Kobalt for $1.1 billion and supposed to securitize that catalog into bonds.
Based on Bloomberg, KKR Credit score Advisors is utilizing a catalog of 65,000 songs – together with hits from The Weeknd, Stevie Nicks, and Infantile Gambino – to promote greater than $732 million of asset-backed securities supported by publishing and sound recording royalties.
Over the summer time, extra information from this world arrived, with a pre-sale report from Kroll Bond Ranking Company (KBRA), confirming that Hipgnosis was within the technique of launching its personal music royalty-backed bond package deal – a $221.65 million securitized providing.
US music licensing/assortment society, SESAC additionally closed a $335 million bond transaction over the summer time. This providing was really a whole-business securitization, which Bloomberg likened in its report on the time to SESAC “successfully mortgaging” its firm.
In September, Harmony acquired the publishing and recorded music catalogs of Tony Banks, Phil Collins and Mike Rutherford, in addition to the publishing and recorded music catalog from their years within the band Genesis in a deal The Wall Road Journal reported to be ‘valued at over $300 million’.
The information adopted a string of latest M&A exercise from Harmony, equivalent to its buy of the belongings of HitCo Leisure and its eight-figure acquisition of Australia & New Zealand-based music writer, Native Tongue.
Harmony spent an estimated $1 billion on acquisitions throughout its first 14 years in enterprise. It then spent two nine-figure sums buying a majority stake in Pulse Music Group in 2020, and then the Think about Dragons publishing catalog, earlier than buying Downtown’s copyright portfolio for $400 million, in 2021.
FTI served because the valuation agent on the transaction and KBRA offered scores providers. DLA Piper served as authorized counsel to Harmony, and King & Spalding LLP as authorized counsel to Apollo associates.
Reed Smith and Greenberg Traurig serviced as particular counsel with respect to music belongings for Harmony and for Apollo associates, respectively.Music Enterprise Worldwide
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