Blackstone’s Hipgnosis has successfully completed a $1.47 billion music rights asset-backed securities transaction (i.e. bond offering).
The ABS deal, referred to as Lyra 24-2, sees investment giant Blackstone raise $1.47 billion in debt financing backed by royalties from the 45,000-song Hipgnosis Songs Fund portfolio it acquired in July.
Blackstone acquired Hipgnosis Songs Fund‘s assets from HSF’s then-public shareholders in a transaction worth USD $1.584 billion.
According to an announcement on Monday (November 11) confirming the completion of the ABS deal, proceeds from the issuance will predominantly be used to “repay existing debt in full and support future acquisitions”.
As reported by MBW last month, a recent report from Kroll Bond Rating Agency cited an unnamed independent third-party valuation firm that valued the HSF portfolio at USD $2.36 billion as of August 1, 2024.
That’s around $150 million more than the total amount HSF spent buying its portfolio over the years ($2.206 billion, according to financial documents).
It’s also around $150 million more than the portfolio’s estimated enterprise value of $2.20 billion when Blackstone acquired it this summer.
The portfolio (originally accumulated between 2018 and 2021 by ex-Hipgnosis boss Merck Mercuriadis) includes songs from the Red Hot Chili Peppers, Fleetwood Mac, Journey, The Chainsmokers, Shakira, Bon Jovi, 50 Cent and Eurythmics.
Lyra Music Assets is Hipgnosis Songs Assets’ second music royalty securitization. Back in 2022, a previous pre-sale report from Kroll confirmed that Hipgnosis was in the process of launching a music royalty-backed bond package – a $221.65 million securitized offering.
KBRA confirmed at the time that the offering, dubbed MUSIC 2022-1, would “be collateralized by royalties from a music catalog of premium content from over 950 songs across five sub-catalogs from top artists and songwriters, including Justin Timberlake, Nelly Furtado, and Leonard Cohen”.
MUFG Securities was the structuring lead for Hipgnosis’ latest ABS deal, with Barclays, Goldman Sachs, Fifth Third Securities and SMBC Nikko acting as joint bookrunner. Blackstone Capital Markets served as a co-manager.
According to the announcement from Blackstone/Hipgnosis today, “with 25 investors, the order book represents one of the most diversified ABS issuance for music rights to date”.
The notes are rated A- by Kroll Bond Rating Agency.
“This achievement not only reinforces the quality and strength of our music catalog but also enables us to unlock new opportunities for growth and investment.”
Ben Katovsky and Dan Pounder, Hipgnosis
Ben Katovsky, Chief Executive Officer of Hipgnosis, and Dan Pounder, Chief Financial Officer of Hipgnosis, said: “We are delighted to announce the successful completion of our second asset-backed securitisation, a significant milestone for Hipgnosis.
“This achievement not only reinforces the quality and strength of our music catalog but also enables us to unlock new opportunities for growth and investment.
“Music rights continues to be a fast-growing investable asset class that we are excited to be a leader in as we stay firmly committed to supporting songwriters and artists, and enhancing the legacy and value of our songs through active song management.”
They added: “With this ABS refinancing completed, we will continue to work on expanding the investor base with further institutionalization of the asset class leveraging Hipgnosis’ proprietary technology and data analytics platform across underwriting, monitoring and reporting.”
“This landmark transaction not only highlights the strength of Hipgnosis’ exceptional catalog but also reflects our capabilities in providing innovative financial solutions in support of their ongoing growth and success.”
Qasim Abbas, Blackstone
Qasim Abbas, European Head of Tactical Opportunities, Blackstone, added: “This landmark transaction not only highlights the strength of Hipgnosis’ exceptional catalog but also reflects our capabilities in providing innovative financial solutions in support of their ongoing growth and success.
“Our partnership underscores the long-term, sustainable value we see in music royalties, and we remain excited for the future.”
FTI Consulting served as the backup manager for the transaction, with Citibank acting as trustee. Virtu Global Advisors, LLC provided valuation services, while Latham & Watkins provided legal counsel for the issuer and Paul Weiss, Rifkind, Wharton & Garrison for the noteholders.
News of rights-backed securitization deals in the music industry is becoming increasingly frequent.
Just two weeks ago, Concord closed an $850 million Asset-Backed Securities transaction to “fuel strategic growth and acquisitions”.
Concord’s $850 million ABS transaction marked the third series of Notes issued as part of a broader $2.6 billion bond offering backed by music rights from Concord’s catalog.
As first reported by MBW last month, a report published by Kroll Bond Rating Agency revealed that proceeds from Concord’s latest ABS transaction were used to acquire a $217.3 million catalog from “a highly successful Latin Music artist and songwriter”.
Elsewhere in the music industry, in March, Kobalt confirmed the raise of $266.5 million via its first-ever Asset-Backed Securitization (ABS) transaction, backed by music royalties from a catalog of more than 5,000 works from 66 writers.
Also in March, HarbourView Equity Partners secured approximately $500 million in debt financing through a private securitization backed by its catalog of music royalties.
Music Business Worldwide