Harmony costs $1.8bn bond providing backed by over 1m music copyrights

On the finish of final month, Harmony was reported to have begun a course of that may see it turn into the most recent massive music firm to launch a bond providing through securitized royalties from copyrights.

In response to a Bloomberg report, monetary big Apollo International 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.

In response to a press launch, Apollo, by its Capital Options enterprise, structured the ABS (asset-backed securities) transaction and shaped 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 might be reinvested to assist the corporate’s development in 2023 and past.

The transaction is claimed by Harmony to be “the biggest 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 Business Affiliation of America (RIAA) certifications.

Works within the securitization catalog alone embrace 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 lots 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 enlargement, fueled by exponential development within the international streaming market, new advertising and marketing platforms, elevated collector demand for vinyl information and, with the mixing of latest 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 international trade in pricing the biggest music ABS transaction in historical past.”

Bob Valentine, Harmony

“Harmony has reached a brand new milestone in its personal evolution and for the broader international trade in pricing the biggest music ABS transaction in historical past,” mentioned Bob Valentine, President of Harmony.

“I’m proud to assist lead an organization partnered with the astonishing depth and breadth of inventive expertise that the works financed by this securitization characterize. I’m additionally terribly grateful {that a} vital variety of blue-chip monetary establishments have taken observe of our success up to now and chosen to take part in our future.

Added Valentine: “As we proceed to raised 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 have now been assembling for years.

“We’re grateful to our financing companions at Apollo and JP Morgan who helped us develop a long-term capital answer that displays the power of the portfolio we have now constructed up to now and additional validates our lively administration technique.”

“We’re happy to supply a tailor-made, versatile structured answer that helps their continued development.”

Bret Leas, Apollo 

Apollo Companion and Head of Asset-Backed Finance Bret Leas, mentioned: “Harmony’s skilled administration crew continues to construct a world-renowned catalog of belongings with diversification and money movement traits nicely suited to asset-based lending.

“We’re happy to supply a tailor-made, versatile structured answer that helps their continued development.”

“Having identified the Harmony Board and administration crew for a few years, we’re happy to assist 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 answer.

“Having identified the Harmony Board and administration crew for a few years, we’re happy to assist their future success.”

In the present day’s information comes simply over 12 months MBW advised you that monetary bonds had been about to turn into an enormous deal within the music enterprise.

That prediction got here true, time and time once more, over the previous 12 months, with numerous headlines hitting our pages about music corporations launching bond choices through securitized royalties from copyrights.

In December 2021, for instance, non-public 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.

In response to Bloomberg, the securities could be supported by each publishing and sound recording rights, in addition to different earnings streams, throughout a complete of 52,729 songs.

These songs make up a bit 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 meant to securitize that catalog into bonds.

In response to BloombergKKR 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 season, extra information from this world arrived, with a pre-sale report from Kroll Bond Ranking Company (KBRA), confirming that Hipgnosis was within the means 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 season. 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, corresponding 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 companies. 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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