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

On the finish of final month, Concord was reported to have begun a course of that will see it change into the newest massive music firm to launch a bond providing by way of securitized royalties from copyrights.

In keeping with a Bloomberg report, monetary large Apollo Global Management was promoting a $1.65 billion bond backed by music rights from Concord’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 “good portion” of its catalog of sound recordings and songs.

In keeping with a press launch, Apollo, via its Capital Options enterprise, structured the ABS (asset-backed securities) transaction and fashioned 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 shall be reinvested to help the corporate’s progress in 2023 and past.

The transaction is claimed by Harmony to be “the biggest asset-backed securitization providing of music rights within the trade thus far when it comes to each measurement of issuance and variety of property (over a million copyrights)”.

Harmony’s new five-year facility is backed by a catalog of greater than 1 million music property 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 Trade Affiliation of America (RIAA) certifications.

Works within the securitization catalog alone embody 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 progress within the international streaming market, new advertising platforms, elevated collector demand for vinyl data and, with the combination of recent applied sciences, diversified platforms for music commercialization,” provides Harmony. “These mixed elements 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,” stated Bob Valentine, President of Harmony.

“I’m proud to assist lead an organization partnered with the astonishing depth and breadth of creative expertise that the works financed by this securitization characterize. I’m additionally terribly grateful {that a} important variety of blue-chip monetary establishments have taken observe of our success thus far 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’ve 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’ve constructed thus far and additional validates our energetic administration technique.”

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

Bret Leas, Apollo 

Apollo Companion and Head of Asset-Backed Finance Bret Leas, stated: “Harmony’s skilled administration workforce continues to construct a world-renowned catalog of property with diversification and money move traits properly suited to asset-based lending.

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

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

Paul Sipio, Apollo Capital Options

Apollo Capital Options’ Paul Sipio, added: “This transaction leverages the size 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 workforce for a few years, we’re happy to help their future success.”

Right now’s information comes simply over 12 months MBW told you that monetary bonds had been about to change into an enormous deal within the music enterprise.

That prediction got here true, time and time once more, over the previous yr, with quite a lot of headlines hitting our pages about music firms launching bond choices by way of securitized royalties from copyrights.

In December 2021, for instance, personal fairness firm Northleaf Capital introduced it was elevating $303.8 million by promoting Asset-Backed Securities (ABS) which can be supported by music rights – together with songs created by Pete Townshend for The Who, and by nation star Tim McGraw.

In keeping with 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 piece of the catalog of Spirit Music Group; Spirit owns a complete portfolio of greater than 100,000 music property.

Our prediction got here true once more in February, when MBW reported that within the second half of October 2021, KKR – by way of its Chord Music enterprise – acquired a large portfolio of rights from Kobalt for $1.1 billion and meant to securitize that catalog into bonds.

In keeping with Bloomberg, KKR 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 Rating Agency (KBRA), confirming that Hipgnosis was within the technique 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, Concord 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, comparable to its purchase of the property 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 acquiring Downtown’s copyright portfolio for $400 million, in 2021.

FTI served because the valuation agent on the transaction and KBRA offered scores providers. 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 property for Harmony and for Apollo associates, respectively.Music Enterprise Worldwide