It’s been eight months since Universal Music Group listed on the Amsterdam Stock Exchange.
Today (May 31), the world’s largest music copyright owner was assigned the first credit rating since publicity from two of the three major rating agencies in the world.
UMG has been assigned a Prime-2 short-term credit rating for the first time and Long-term credit rating Baa1 “With stable outlook” by Moody’s Investors Service.
In addition, S&P Global Ratings assigned the company a Short-term credit rating A-2as well as a Long-term credit rating BBB “With a stable outlook”.
In a media statement announcing the ratings, UMG said that it “considers these investment ratings to support its financial strategy and is committed to maintaining investment ratings”.
UMG said it has been advised by Bank of America in both credit rating processes.
Universal’s ratings announcement came four weeks after the company published financial results for Q1 2022.
Across all of its divisions (including recorded music, publishing, and more) UMG posted revenue for the three months through the end of March of 2.199 billion euros ($2.46 billion).
That was up 16.5% year over year in constant currency, driven by growth across all revenue segments.
Commenting on the ratings news in a media statement released today, Boyd Muir, EVP of UMG, Chief Financial Officer and President of Operations, said: “We are pleased that, during the ratings run, For the first time since we went public, rating agencies have recognized our strong credit attributes.
“Both companies highlight our leadership in the music industry, best-in-class portfolio, recurring revenue streams and diversification, and low leverage as drivers. This is what makes up these solid ratings.
“The Baa1/BBB rating designation is another positive recognition of our early days as an independently listed company.”
“We are pleased that, in the first rating since we went public, the rating agencies have recognized our strong credit attributes.”
Boyd Muir, UMG
In a press release explaining its decision to rate UMG, S&P said that the music company “benefits from a market-leading position in the burgeoning music industry, as well as a large and diverse global catalog of phonograms and compositions across genres”.
S&P notes that UMG “has stable and predictable revenue, earnings, and cash flow through its high percentage of subscription revenue through streaming” and that the company’s “unique music library” The company will continue to generate solid and predictable revenue, income and cash flow.”
S&P added: “In our view, UMG’s low leverage provides the group with ample financial flexibility, but we do consider the possibility of a large debt-financed portfolio buyback. or substantially higher dividends.”
“The Baa1 rating reflects the company’s strong operating momentum supported by the music industry’s secular growth prospects fueled by growing consumer acceptance of platforms. on-demand music streaming, social media apps, and other emerging digital platforms.”
Agustin Alberti, Moody’s
Moody’s, meanwhile, said in its own press release that the reasoning behind its rating for UMG reflects “an ongoing transition to a more predictable and recurring revenue profile based on on the growth of streaming and publishing revenue”.
The ratings agency also cites what it says are, “favorable conditions for the long-term growth of the global music industry driven by strong consumer acceptance of music services.” Premium subscription streaming services, social media applications, and emerging digital platforms that Moody’s expects to continue, particularly in emerging markets.”
Other reasons for Moody’s rating include its “good track record in supporting and advancing the careers of artists through its global network of iconic labels and publishing companies spanning over 200. market”, as well as “a catalog of the best music with a good geographical location diversity and monetization opportunities”, plus an “experienced management team with a proven track record of ability adapt to new trends through innovation”.
Among the “factors that could lead to a downgrade or upgrade” listed by Moody’s, the agency stated that, “downward pressure could develop if a company’s business model deteriorates leading to to raw materials, continuously eroding the market leading its position, profitability or generating cash flow.
Moody’s added: “Ratings could also face downward pressure if management adopts more aggressive fiscal policy, makes major acquisitions, or finances large share buybacks by in debt.”
Agustin Alberti, Vice President of Moody’s – Senior Analyst and principal analyst at UMG, said: “The Baa1 rating reflects the company’s strong operating momentum supported by its world growth outlook. of the music industry driven by the rise of consumers towards on-demand music streaming platforms, social media applications, and other emerging digital platforms,”
“The rating is also supported by UMG’s prudent financial policy as demonstrated by its current low leverage ratios and public commitment to a solid investment rating.”Worldwide music business
