In July, funding large Blackstone acquired Hipgnosis Songs Fund‘s belongings from HSF’s then-public shareholders in a transaction price USD $1.584 billion.
In accordance with MBW’s evaluation, that transaction – if 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 amassed between 2018 and 2021 by ex-Hipgnosis boss Merck Mercuriadis) has simply been re-valued, courtesy of a brand new report from Kroll Bond Score 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 discount 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 overall quantity HSF spent shopping for its portfolio over time ($2.206 billion, based on 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 belongings 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 Property (Delaware) L.P, will see Blackstone increase $1.474 billion in debt financing.
The brand new valuation of the HSF belongings, says Kroll, was made utilizing a reduction charge of 8.25% and a reduced money circulation technique 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] method is the prevailing trade conference for valuing comparable belongings.”
Kroll report on Hipgnosis Songs Fund belongings, 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 method and assumed a reduced web current worth of projected long-term free money circulation of 8.50% for the Catalog.
“This method is the prevailing trade conference for valuing comparable belongings. 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 trade 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 hundreds of thousands of {dollars} larger than a latest valuation of HSF’s belongings 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 larger low cost charges leads to decrease valuations, and vice-versa.)
Lyra Music Property is Hipgnosis Songs Property’ 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 Scorching Chili Peppers, Neil Younger, Journey, The Chainsmokers, and Shakira.
In accordance with Kroll’s report, proceeds from the transaction shall be used to fund “reserve accounts, pay sure transaction bills, repay current indebtedness, and for different common company functions”.
Again in 2022, a earlier pre-sale report from Kroll confirmed that Hipgnosis was within the means 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 high artists and songwriters, together with Justin Timberlake, Nelly Furtado, and Leonard Cohen”.
Rights-backed securitization is turning into an more and more widespread approach for music firms to lift cash.
Simply two weeks in the past, it was additionally revealed by way of Kroll Bond Score Company report that Harmony lately raised $850 million in debt financing by way 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 sequence 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 trade, in March, Kobalt confirmed the increase of $266.5 million by way of 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 way 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 gaggle of traders handing an organization cash, quite than stated firm elevating that cash by way of financial institution debt.
When every thing goes nicely, these traders then make their a reimbursement (plus curiosity) by way of revenue over numerous years generated by an underlying asset.
To lift investor curiosity and confidence in bond choices, bonds are ‘rated’ by monetary establishments. Bond sellers are usually searching for an ‘A’ ranking or above; a a lot decrease ranking will lead to one thing being labelled a ‘junk’ bond.Music Enterprise Worldwide
