850 million in asset-backed securities (ABS), including music copyrights associated with a music catalog of over 1 million songs, theatrical music publishing rights, and recordings by over 10,000 songwriters, artists, and other royalty artists. Millions of dollars are secured.
According to Moody’s Ratings, a portion of the bonds will be used to fully repay the 2023-1 series of bonds on their scheduled closing dates. The deal is expected to close on October 28, according to Asset Securitization Report’s transaction database.
Concord Music Royalty Series 2024-1 plans to issue only one class of bonds with a statutory final maturity date of October 20, 2074, according to the rating agency. Moody’s said the tranche received an ‘A2’ rating from the rating agency.
The rating agency said the pool is diversified by artist, genre and vintage, Moody’s said.
The assets are highly seasoned and flow differently depending on artist, region, and vintage. Approximately 60% of the portfolio’s 2023 profits will come from recorded music royalties, and 40% from publishing royalties.
The global music industry has strong fundamentals, backed by healthy streaming growth and favorable statutory royalty rates. Additionally, the asset has a loan-to-value ratio of approximately 52% and has the cash flow to withstand significant haircuts. As on-demand streaming services proliferate and digital platforms emerge, competition for listeners will only intensify and revenue from licensing is expected to increase.
Concord Music Group is the manager on the transaction, with FTI Consulting acting as backup manager on the transaction. CMGI’s management team has decades of experience in managing and acquiring music rights.
One of the credit challenges for this deal is that revenue growth is uncertain, even as consumers shift to streaming music instead of owning physical or digital copies of the music. It is a certain thing. Another risk is that the deal will impact Catalog’s 2023 revenue outside the U.S., the rating agency said. Euros and British pounds will account for 23% of total revenue in 2023. The remainder is denominated in US dollars, cushioning the impact of foreign currencies.
Moody’s said cash flows into the bonds could be at risk depending on other circumstances, including the potential risk of copyright infringement, the dilution of royalties from artificial intelligence-generated songs, and the possibility of future portfolio composition changes. There is a possibility of exposure.
