Now Hipgnosis Songs Fund locks in interest rate swaps, providing ‘long term certainty’ to cost of borrowing

Hipgnosis Song Foundation (HSF) completed successfully previously announced interest rate swap agreements.

The move provides the company with more certainty about the cost of its debt after it secures a 700 million USD revolving credit facility (RCF), announced earlier this week.

Through interest rate hedging, companies with loans can swap a variable interest rate for a fixed rate over a period of time.

In July, the London-listed HSF noted that rising interest rates were pushing borrowing costs to the max 600 billion dollars debt package.

That prompted the company to rethink its leverage structure at the time as it sought to reduce interest rate risk.

Reviews show results in five years 700 million dollars revolving credit facility announced on monday (October 3). Citibank is the primary arranger in that RCF, which HSF says will help limit interest rate risk.

HSF on Wednesday (October 5) said it was pursuing interest rate swaps – now completed – on its debt.

Because of those swaps, the interest rate on all of HSF’s withdrawn debt is now fixed at 5.71%including debt margin, through January 2, 2023.

From that point on, the company will carry out interest rate swaps to hedge $540 million of its debt.

Of that $540 million total, $340 million will be hedging until the RCF matures on September 30, 2027 at a fixed rate of 5.67% including debt margin.

Further 200 million dollars will be hedging until January 3, 2026 at a fixed rate of 5.89%including debt margin.

The balance remains unconverted after that date to provide operational flexibility for RCF, the company added.

In contrast, HSF’s previous $600 million loan had a credit margin of 3.25% on the floating rate of The London Interbank Rate (LIBOR).

At the time of publication, the one-month LIBOR is located at 3.185 % – that is, without the new RCF and the fixed rate, Hipgnosis will now pay 6.43% its debt ratio.

With the new exchange rate swaps now secured, HSF has protected itself against the possibility of LIBOR (which itself reflects interest rates at various global banks) going higher in the future.

Merck MercuriadisFounder and CEO of Hipgnosis Song Management, said of HSF’s new interest rate hedging transactions: “Along with the completion of our new Revolving Credit Fund, the execution of the deals This swap will end our refinancing.

“As the debt market becomes increasingly unpredictable throughout 2022, these new arrangements provide lasting certainty and a stable platform to capitalize on the music industry’s consistent trends.”

“As the debt market becomes increasingly unpredictable throughout 2022, these new arrangements provide long-term certainty and a stable platform to capitalize on relevant trends in the music industry. “

Merck Mercuriadis, Hipgnosis Song Manager

HCF clarified today that the cost of arranging both RCF and hedging is included in the principal amount under the RCF.

This provides the company with certainty about the amount of fixed-rate payment obligations over the term of those contracts.

Interest rate hedging is one of the most viable solutions for companies dealing with multimillion-dollar debt as central banks around the world continue to raise interest rates in an effort to contain Inflation is soaring.

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.Worldwide music business