Hipgnosis Songs Fund secures new $700m debt package, ‘materially’ reducing interest burden on its borrowing

Hipgnosis Song Foundation (HSF) has secured a new $700 million revolving line of credit to refinance its existing $600 million debt.

The new loan package, confirmed today (October 3), will have a term of 5 years until September 30, 2027 and will be used to fully refinance the company’s debts and raise capital. increase the company’s working capital.

Its newest annual reportreleased in July, Hipgnosis noted that rising interest rates have resulted in “increasing borrowing costs” on top of its previous $600 million debt-maximum package.

“The Board of Directors together with the Investment Advisor are in the process of reviewing the leverage structure to reduce interest rate risk and control costs for the Company,” HSF said at the time.

How new 700 million dollars That interest rate risk improvement package for HSF?

HSF today confirmed that the interest charged on the new facility is based on the New York Federal Reserve Guaranteed Overnight Funding Rate (SOFR), plus the amplitude between 2.00% and 2.25% depending on the size of the company’s total debt withdrawal. (The initial deposit will be 2.00%.)

That’s different from the previous HSF agreement on the maximum 600 million dollars debt basis. The credit margin on that debt is 3.25% on the floating number of The London Interbank Rate (LIBOR).

To paint an approximate picture of the difference between these two indebtednesses now:

It should be noted that both LIBOR and SOFR are floating rates, so the above rates are obviously subject to change.

However, according to its new 700 million dollars agreement, HSF (aka SONG) said today that it is in additional discussions to “major repair [our] differential interest rates by entering into interest rate swaps to fence interested [our] withdrawn debt”.

National City Bank was the principal arranger and sole bookkeeper for the new $700 million facility (with Truist Securities, Inc., MUFG Union Bank, NA and Fifth Third Bank as co-densers. leader).

Jim IrvinSenior Vice President, City National Bank, today explains why his company has extended a new $700 million debt package for HSF, despite challenging macroeconomic conditions .

“We are extremely optimistic about the growth and potential of the Hipgnosis Songs Fund, which is why City National Bank is pleased to offer debt refinancing,” he said.

“The new revolving line of credit will reduce the company’s debt margin at a time of volatile interest rates and ensure SONG delivers outstanding value to shareholders going forward.”

“In an increasingly unpredictable debt market, this deal significantly reduces our margin… the swaps we hope are close to closing. [will] provides long-term certainty and a stable platform to take advantage of our industry. “

Merck MercuriadisHipgnosis Song Foundation

Merck MercuriadisThe CEO and Founder of Hipgnosis Song Management added: “In an increasingly unpredictable debt market, this deal significantly reduces our interest margin and the swaps we hope to see. The near-term outlook will provide long-term certainty and a stable platform to capitalize on relevant trends in our industry. “

Mercuriadis added: “Continuous growth in streaming and additional revenue streams from digital platforms, regardless of macroeconomic conditions, coupled with the innovative terms of our new RCF I’m very encouraging to SONG and will bring value to our shareholders as the income from our song portfolio increases.”

Chris HelmChief Financial Officer (SONG) at Hipgnosis Song Management, commented: “Our new debt reduces interest margins and provides more flexibility and space for the Company.

“This is a strong commitment from both our new and old lenders and we want to thank them for their support.”

London-listed HSF has not purchased a portfolio for over a year and, due to market conditions, has refused to raise new capital through a share issue.

In contrast, however, the broader tri-branch Hipgnosis has spent around $300 million on music catalogs throughout 2022 so far.

In addition to the Hipgnosis Songs Fund, the Hipgnosis team established by Merck Mercuriadis includes the investment consulting firm Manage Hipgnosis Songs (HSM) and Song Hipgnosis Capital (HSC). The latter formed through 1 billion dollars in backing from the private equity giant Slat in 2021.

HSM is tasked with finding portfolio acquisition opportunities for both HSF and HSC. HSC funds have been used to purchase portfolios from the likes of Justin Timberlake and Leonard Cohen’s estate this year.

HSF secured the new credit two weeks after JP Morgan’s release optimistic outlook on the company. The investment giant said it is bullish on the value of HSF due to the asset class’s long-term growth potential and high portfolio quality.

“We expect a very strong bounce back [HSF’s] earnings performance” in the coming months, JP Morgan said, referring to the negative impact of the Covid lockdown on the company’s previous fiscal year’s publishing revenue.Worldwide music business