Hipgnosis to Sell $1.47 Billion in Bonds Backed by Music Royalties over controversies

 

Hipgnosis, a prominent player in the music rights acquisition space, is making waves with its latest financial maneuver: the sale of $1.47 billion in bonds backed by royalties from a roster of high-profile artists, including Shakira, Journey, Red Hot Chili Peppers, and 50 Cent. This bold move is set to reshape the landscape of music finance, leveraging a catalog worth an estimated $2.36 billion.

The bonds, issued by a unit of Hipgnosis Songs Assets, will be secured by both publishing and sound recording rights for over 45,000 songs. According to the Kroll Bond Rating Agency (KBRA), more than 70% of the songs included in this vast collection were released more than a decade ago, highlighting the long-term value of these musical assets.

Founded in 2018 in London, Hipgnosis has played a pivotal role in the surge of investor interest in music rights, acquiring stakes in the catalogs of numerous legendary musicians

, including Neil Young and Stevie Nicks. The company has significantly influenced the industry, catalyzing a wave of similar acquisitions as artists seek to monetize their legacies.

In a 2021 interview, Merck Mercuriadis, the former head of Hipgnosis, expressed optimism about the future value of music royalties, predicting that many songs could triple in value over the next decade due to rising streaming royalties. However, the company has faced challenges, including rising interest rates and an accounting error that negatively impacted the perceived value of its portfolio. This led to a sharp decline in its London-listed shares.

In a strategic pivot, Hipgnosis sold itself to Blackstone in a deal that valued the company’s equity at approximately $1.6 billion, closing in July. The recent bond sale marks the second securitization of Hipgnosis music royalties, following a previous successful offering of $221.65 million in 2022.

Mitsubishi UFJ Financial Group is leading the current asset-backed security offering, with KBRA anticipating a grade of A minus for each of the three segments of the deal. This latest move underscores the growing interest in music royalty-backed securities, which have totaled around $1.1 billion in volume so far in 2024, according to Bloomberg News data.

As Hipgnosis navigates these financial waters, the music industry watches closely, aware that the outcomes of such ventures could redefine how artists and investors interact in the evolving landscape of music rights and royalties.