US-based SESAC Music Group (SMG) has completed a USD $889 million whole business securitization (WBS), marking the company’s fourth trip to the asset-backed securities market.
The news arrives as music companies increasingly turn to the bond market to fund growth.
US-headquartered SMG – home to the SESAC PRO, plus Harry Fox Agency (HFA), AudioSalad, and other companies – issued the bonds through a series of new five-year senior notes.
These notes are backed by “substantially all SESAC Music Group’s assets and revenues,” according to SMG – including subsidiaries in its Performing Rights and Music Services divisions.
SESAC’s Performing Rights division represents songwriters such as Ariana Grande, Kurt Cobain, Jack Harlow, Billie Joe Armstrong, and Axl Rose, and composers of music in TV shows like Seinfeld, Grey’s Anatomy, Suits, and Modern Family, and films like Cars 3, Ant-Man and the Wasp, Frozen, and Napoleon Dynamite.
Meanwhile, the company’s Music Services arm offers copyright administration, licensing, and royalty collection services for rightsholders worldwide via subsidiaries such as AudioSalad, Mint, Audiam, HFA, and Rumblefish.
The new WBS transaction brings the total outstanding debt of SESAC, which is majority-owned by Blackstone, to about $1.1 billion.
The securitization received strong investor interest, with demand three times oversubscribed. SESAC said this reflected “robust investor demand underpinning SESAC’s WBS strategy.”
MBW understands that SESAC Music Group executed its first tranche of whole business securitization in 2019, securing between $500 million and $600 million.
That was followed by a second tranche for $335 million in 2022. Last year, SESAC raised another $180 million through securitization.
Rather than securing finance backed by assets such as music rights – like Concord‘s recent $1.77 billion ABS – SESAC Music Group structures its debt by securitizing its entire company’s operation.
Comparisons to a mortgage-like structure on private property are not unwarranted.
“As we continue to expand both segments of our business, ensuring long-term access to institutional capital, and continuing to build upon our strong financial foundation and established reputation are crucial.”
John Josephson, SESAC Music Group
SESAC partly employs the practice of whole business securitization to help bankroll its acquisitions.
For example, the firm used previous WBS proceeds to help finance its acquisition of production music company Audio Network in 2021.
SESAC Music Group Chairman and CEO, John Josephson, said of SESAC’s latest WBS transaction: “As we continue to expand both segments of our business, ensuring long-term access to institutional capital, and continuing to build upon our strong financial foundation and established reputation are crucial.
“WBS transactions like the one we just closed will remain a vital part of our growth strategy, allowing us to continue to lower our cost of capital while expanding our global capabilities in support of the independent songwriters, composers, publishers, labels, artists and CMOs we serve.”
The timing of SESAC’s latest WBS transaction reflects a surge in music industry securitizations.
As mentioned, just last week, Concord closed a $1.765 billion bond offering backed by its 1.3 million music copyrights.
Meanwhile, Blackstone-owned Recognition Music Group disclosed plans for a $372 million issuance of five-year bonds backed by its multi-billion-dollar music catalog that includes rights from Red Hot Chili Peppers, Justin Bieber and Shakira.
SESAC says its latest WBS issuance “is the largest 144a, rated whole business securitization in the music sector to date.”
Morningstar DBRS assigned the notes a BBB(sf) rating. Guggenheim Securities, Barclays Capital, and ING Financial Markets served as joint bookrunners, while Blackstone Securities acted as co-manager.
Virtu Global Advisors provided valuation services, while Latham & Watkins provided legal counsel for SESAC and White & Case for the underwriters.Music Business Worldwide
