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Hipgnosis reveals new $700m debt financing measure

Founders: Hipgnosis Songs Fund was established four years ago by Merck Mercuriadis (L), a former Iron Maiden manager, and Nile Rodgers (R), frontman of funk band Chic

Hipgnosis Music Royalty Investor Who Bought Neil Young Songs From Blondie Reveals New $700M Debt Financing Deal

  • Company’s new $700 million revolving credit facility will last through September 2027
  • Hipgnosis was founded by Merck Mercuriadis and Chic guitarist Nile Rodgers
  • Christine McVie and Neil Young have sold their old catalogs to Hipgnosis

Music investment fund Hipgnosis, known for buying up old catalogs belonging to Blondie, Neil Young and Leonard Cohen, has announced a new debt refinancing program.

The song management company said it has entered into a revolving credit facility worth $700 million, which will last until the end of September 2027 and will also go in part for “funds of rolling”.

Interest on this new facility will be based on the Overnight Secured Funding Rate, a benchmark interest rate that replaced LIBOR, plus a margin of between 2 and 2.25% depending on the gross debt drawn .

Founders: Hipgnosis Songs Fund was established four years ago by Merck Mercuriadis (L), a former Iron Maiden manager, and Nile Rodgers (R), frontman of funk band Chic

Founders: Hipgnosis Songs Fund was established four years ago by Merck Mercuriadis (L), a former Iron Maiden manager, and Nile Rodgers (R), frontman of funk band Chic

In addition, the Guernsey-registered company revealed that it was close to reaching an agreement to reduce its interest payments by entering into interest rate swaps to hedge interest on its drawn debt.

In July, Hipgnosis bosses revealed they were reviewing the company’s debt structure as interest rate hikes had led to higher borrowing costs.

Chris Helm, CFO of Hipgnosis Song Management, said: “Our new credit facility lowers the interest margin and provides additional flexibility and headroom for the business. This is a strong commitment from our new and old lenders.

Since its founding four years ago by Merck Mercuriadis, a former Iron Maiden manager, and Chic frontman Nile Rodgers, Hipgnosis has raised £1.3bn in equity and incurred $600m in debt to to invest in old catalogs.

Some of the most famous musicians to have sold their songwriting rights to the company in exchange for a huge salary include the Red Hot Chili Peppers, Neil Young and Fleetwood Mac’s Lindsey Buckingham and Christine McVie.

After a whirlwind of catalog acquisitions in its first three years, the company has slowed the pace of investment over the past 18 months, however, as worries about its finances have grown.

Net debt stood at $569.9 million at the end of March, compared with just $51.8 million at the same time two years earlier.

Still, Mercuriadis said the new funding deal and potential swap deal would “provide long-term certainty” amid an “increasingly unpredictable debt market” and give him more opportunities. to benefit from certain underlying trends within the music industry.

These include the rise of streaming platforms, such as Spotify, Apple Music and Deezer, which generated approximately $25.1 billion in global revenue in 2021, an increase of nearly a third from compared to the previous year.

He added: “The continued growth of streaming and additional revenue streams from digital platforms, regardless of macro conditions, coupled with the improved terms of our new RCF is very encouraging.”

Hipgnosis received a boost three months ago when a US court upheld a decision to increase the percentage of songwriting royalties paid by streaming platforms from 10.5% to 15.1%.

Analysts at brokerage Liberum predicted that the company would enjoy a “significant” increase in revenue as a result of the decision, although it was unable to predict the magnitude of that benefit.

Shares of the Hipgnosis Songs Fund rose 1.1% to 90p late Monday afternoon, although their value has also fallen around 28% this year.

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