(Bloomberg) -- Hipgnosis, a company that bought up vast catalogs of popular music, is selling $1.47 billion of bonds backed by royalties from artists including Shakira, Journey, Red Hot Chili Peppers and 50 Cent.
The bonds from a unit of Hipgnosis Songs Assets will be backed by publishing and sound recording rights for more than 45,000 songs, according to Kroll Bond Rating Agency, which is grading the notes. An independent valuation said that the total catalog is worth about $2.36 billion, based on projected cash flow from the assets. More than 70% of the songs were released more than 10 years ago.
Hipgnosis was founded in 2018 in London, and helped kick off a feeding frenzy for investors buying music rights from high profile artists. It snatched up all or part of the rights to the catalogs of musicians including Shakira, Neil Young, and Stevie Nicks, among others.
In an interview with Bloomberg in 2021, Merck Mercuriadis, then head of Hipgnosis, said that he believed the value of many songs could triple in the next decade, in part because streaming royalties would rise. But the company faced a series of problems, including interest rates climbing and an accounting error that cut the book value of its portfolio. Its London-listed shares plunged. Hipgnosis sold itself to Blackstone in a deal that valued the company’s equity at around $1.6 billion and closed in July.
The bonds that the company is now selling will mark the second securitization of Hipgnosis music royalties, after a $221.65 million sale in 2022. Mitsubishi UFJ Financial Group is leading the latest asset backed security offering. KBRA expects to assign each of the three parts of the deal a grade of A minus.
Music royalty ABS volume so far in 2024 has totaled around $1.1 billion, according to data compiled by Bloomberg News.
--With assistance from Scott Carpenter.
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