In July, funding large Blackstone acquired Hipgnosis Songs Fund‘s property from HSF’s then-public shareholders in a transaction value USD $1.584 billion.
In line with MBW’s evaluation, that transaction – while you consider 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 received 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 full quantity HSF spent shopping for its portfolio through the years ($2.206 billion, in accordance 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 throughout 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 charge of 8.25% and a reduced money circulation methodology primarily based on money circulation 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 web current worth of projected long-term free money circulation 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 primarily based upon sure assumptions relating to projected monetary efficiency using terminal progress and decay charges.”
Kroll added: “The Valuation Agent has utilized numerous long-term progress and decay charges to every asset throughout the Catalog, reflecting their views of the business and the efficiency of every particular person songwriter. The typical progress charge for the valuation was decided to be roughly 2.00%.”
The valuation printed in Kroll’s report is lots of of thousands and thousands of {dollars} increased than a latest valuation of HSF’s property by Shot Tower Capital, which had a midpoint of $1.95 billion (primarily based on HSF’s efficiency as of the tip of September 2023).
Shot Tower’s valuation was primarily based on a reduction charge of 9.25%. (In fundamental phrases, making use of increased low cost charges ends in decrease valuations, and vice-versa.)
Lyra Music Belongings is Hipgnosis Songs Belongings’ second music royalty securitization, and shall be collateralized by royalties from what it calls “the legacy SONG portfolio”, which incorporates content material from artists and songwriters together with Pink Sizzling Chili Peppers, Neil Younger, Journey, The Chainsmokers, and Shakira.
In line with Kroll’s report, proceeds from the transaction shall be used to fund “reserve accounts, pay sure transaction bills, repay present indebtedness, and for different basic company functions”.
Again in 2022, a earlier pre-sale report from Kroll confirmed that Hipgnosis was within the technique of launching a music royalty-backed bond package deal – a $221.65 million securitized providing.
KBRA confirmed on the time that the providing, dubbed MUSIC 2022-1, “shall 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 method for music corporations to boost 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 means of a non-public 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 means of a non-public 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 traders handing an organization cash, relatively than stated firm elevating that cash through financial institution debt.
When every thing goes properly, these traders then make their a refund (plus curiosity) through revenue over quite a few years generated by an underlying asset.
To boost investor curiosity and confidence in bond choices, bonds are ‘rated’ by monetary establishments. Bond sellers are sometimes on the lookout for an ‘A’ ranking or above; a a lot decrease ranking will lead to one thing being labelled a ‘junk’ bond.Music Enterprise Worldwide
