In July, funding big Blackstone acquired Hipgnosis Songs Fund‘s property from HSF’s then-public shareholders in a transaction value USD $1.584 billion.
Based on MBW’s evaluation, that transaction – if you think about HSF’s debt – gave HSF’s portfolio of 45,000 songs an approximate enterprise worth of USD $2.20 billion.
That very same portfolio (initially gathered between 2018 and 2021 by ex-Hipgnosis boss Merck Mercuriadis) has simply been re-valued, courtesy of a brand new report from Kroll Bond Ranking Company.
And guess what? It not solely means that the songs acquired by Mercuriadis at HSF have considerably grown in worth – it additionally means that Blackstone acquired a little bit of a cut price when it purchased them.
Kroll’s report cites an unnamed unbiased third-party valuation agency that valued the HSF portfolio at USD $2.36 billion as of August 1, 2024.
That’s round $150 million greater than the whole quantity HSF spent shopping for its portfolio through the years ($2.206 billion, in keeping with monetary paperwork).
It’s additionally round $150 million greater than the portfolio’s estimated enterprise worth of $2.20 billion when Blackstone acquired it this summer time.
Kroll’s newly-published valuation of the HSF property seems inside a report confirming that the 45,000 songs contained inside the “legacy” HSF catalog are getting used to collateralize an Asset-Backed Securities (ABS) transaction (i.e. bond providing).
That ABS transaction, known as Lyra Music Belongings (Delaware) L.P, will see Blackstone elevate $1.474 billion in debt financing.
The brand new valuation of the HSF property, says Kroll, was made utilizing a reduction fee of 8.25% and a reduced money move technique based mostly on money move forecasts.
The Kroll report notes that the $2.36 billion valuation doesn’t give any credit score to income generated by identify, picture, and likeness rights.
“The Valuation Agent has valued the Catalog at $2.36 billion… [its] strategy is the prevailing business conference for valuing comparable property.”
Kroll report on Hipgnosis Songs Fund property, now owned by Blackstone
Explaining the unnamed valuer’s methodology, Kroll wrote: “The Valuation Agent has valued the Catalog at $2.36 billion… The Valuation Agent used the revenue strategy and assumed a reduced internet current worth of projected long-term free money move of 8.50% for the Catalog.
“This strategy is the prevailing business conference for valuing comparable property. The Valuation Agent developed long run projections for the Catalog over a projection interval of roughly 40 years, after which estimated the money flows past the projection interval based mostly upon sure assumptions concerning projected monetary efficiency using terminal progress and decay charges.”
Kroll added: “The Valuation Agent has utilized varied long-term progress and decay charges to every asset inside the Catalog, reflecting their views of the business and the efficiency of every particular person songwriter. The common progress fee for the valuation was decided to be roughly 2.00%.”
The valuation revealed in Kroll’s report is a whole lot of thousands and thousands of {dollars} larger than a latest valuation of HSF’s property by Shot Tower Capital, which had a midpoint of $1.95 billion (based mostly on HSF’s efficiency as of the top of September 2023).
Shot Tower’s valuation was based mostly on a reduction fee of 9.25%. (In fundamental phrases, making use of larger low cost charges ends in decrease valuations, and vice-versa.)
Lyra Music Belongings is Hipgnosis Songs Belongings’ second music royalty securitization, and might be collateralized by royalties from what it calls “the legacy SONG portfolio”, which incorporates content material from artists and songwriters together with Crimson Sizzling Chili Peppers, Neil Younger, Journey, The Chainsmokers, and Shakira.
Based on Kroll’s report, proceeds from the transaction might be used to fund “reserve accounts, pay sure transaction bills, repay present indebtedness, and for different common company functions”.
Again in 2022, a earlier pre-sale report from Kroll confirmed that Hipgnosis was within the strategy of launching a music royalty-backed bond bundle – a $221.65 million securitized providing.
KBRA confirmed on the time that the providing, dubbed MUSIC 2022-1, “might be collateralized by royalties from a music catalog of premium content material from over 950 songs throughout 5 sub-catalogs from prime artists and songwriters, together with Justin Timberlake, Nelly Furtado, and Leonard Cohen”.
Rights-backed securitization is changing into an more and more widespread manner for music corporations to lift cash.
Simply two weeks in the past, it was additionally revealed through Kroll Bond Ranking Company report that Harmony not too long ago raised $850 million in debt financing by a personal securitization backed by its catalog of music rights.
That very same report revealed that $217.3 million was used to purchase the catalog of a thriller Latin Music celebrity which turned out to be Daddy Yankee.
Harmony’s $850 million ABS transaction, referred to by Kroll because the issuance of the Sequence 2024-1 Notes, marked the third collection of Notes issued as a part of a broader $2.6 billion bond providing backed by music rights from Harmony’s catalog.
Elsewhere within the music business, in March, Kobalt confirmed the elevate of $266.5 million through its first-ever Asset-Backed Securitization (ABS) transaction, backed by music royalties from a catalog of greater than 5,000 works from 66 writers.
Additionally in March, HarbourView Fairness Companions secured roughly $500 million in debt financing by a personal securitization backed by its catalog of music royalties.
In 2022, SESAC Music Group additionally closed a reported $335 million bond transaction.
Bonds act a bit like loans, however with a bunch of buyers handing an organization cash, relatively than mentioned firm elevating that cash through financial institution debt.
When every little thing goes nicely, these buyers then make their a reimbursement (plus curiosity) through revenue over a lot of years generated by an underlying asset.
To lift investor curiosity and confidence in bond choices, bonds are ‘rated’ by monetary establishments. Bond sellers are sometimes in search of an ‘A’ ranking or above; a a lot decrease ranking will lead to one thing being labelled a ‘junk’ bond.Music Enterprise Worldwide
