Recognition Music Group \u2013 the Blackstone-owned company that now controls the portfolio of music formerly known as Hipgnosis \u2013 is planning a $372-million issuance of five-year bonds backed by its multi-billion-dollar music catalog.<\/p>\n
That catalog includes recorded music and\/or publishing rights from\u00a0artists such as the\u00a0Red Hot Chili Peppers<\/strong>,\u00a0Journey<\/strong>,\u00a0Justin Bieber,<\/strong><\/span>\u00a0and Shakira<\/strong>.<\/p>\n Proceeds from the transaction will be used to fund Recognition\u2019s reserve accounts, repay existing debt, cover certain transaction expenses, and go towards general corporate purposes, according to a report<\/a> from Kroll Bond Rating Agency.<\/strong><\/p>\n Kroll notes that the Recognition catalog’s assets include those from the “legacy” Hipgnosis Songs Fund<\/strong> (HSF) portfolio.<\/p>\n According to Kroll’s report, based on a third-party valuation as of March 31, the catalog backing Recognition’s ABS transaction was worth USD $2.95 billion, <\/strong>inclusive of $340.8 million<\/strong> in additional assets that Recognition added to it.<\/p>\n This suggests the portfolio that until recently was known as Hipgnosis Songs Fund<\/strong> (HSF) was worth $2.61 billion<\/strong> as of the end of March (excluding $340.8 million<\/strong> in additional assets added by Recognition.)<\/p>\n It also suggests that the HSF music rights portfolio built by Merck Mercuriadis<\/strong> has been rapidly growing in value since funds controlled by Blackstone<\/strong> acquired it<\/a> in the summer of 2024.<\/p>\n As recently as last October, KBRA valued the HSF portfolio<\/a> at $2.36 billion;<\/strong>\u00a0Blackstone\u2019s purchase price for HSF several months earlier implied a value<\/a> of $2.2 billion<\/strong>.<\/p>\n According to KBRA\u2019s analysis, Recognition’s portfolio of around 47,000<\/strong> master recordings, compositions, and related assets consists almost entirely of catalog. The weighted average age of the music is around 21<\/strong> years, with 76%<\/strong> released more than 10 years ago and 96%<\/strong> released more than five years ago.<\/p>\n KBRA describes it as a \u201clarge, diversified catalog with globally recognized songs and artists,\u201d but notes that its revenue is fairly concentrated: The top 10 songs in the portfolio account for around 11%<\/strong> of the royalties.<\/p>\n The rights in the portfolio are administered by numerous publishers and CMOs, among them Kobalt<\/strong>, Sony Music Publishing<\/strong>\u00a0and Universal Music Publishing Group<\/strong>.<\/p>\n KBRA gave the bond issuance a rating of A, which is its third-highest ranking (high credit quality, low risk of default). It also noted that it expects to upgrade its rating on the previous bond issuance from Recognition, from A- to A.<\/p>\n \u201cStreaming revenues continue to represent a positive tailwind to industry growth and catalog cashflow, even as streaming growth rates have begun to decelerate in certain markets.\u201d<\/p>\n