Music rights associated with music catalogs containing more than a million songs, theatrical music publishing copyrights, and recordings from more than 10,000 songwriters, artists and other royalty artists will secure $850 million in asset-backed securities (ABS).
Some of the notes will be used to repay notes from the 2023-1 series in full on the expected closing date, according to Moody’s Ratings. Asset Securitization Report’s deal database notes that the deal is slated to close on October 28.
Concord Music Royalties, series 2024-1 will issue just one class of notes, which has a, Oct. 20, 2074 legal final maturity date, according to the rating agency. That tranche got an A2 rating from the rating agency, Moody’s said.
The rating agency says the pool is diversified by artist, genre and vintage, Moody’s said.
Assets are highly seasoned, with streams that are varied by artist, region and vintage. Some 60% of the portfolio’s 2023 profit is from recorded music royalties, and 40% are from publishing royalties.
The global music industry is strong, with fundamentals that are showing healthy growth in streaming and favorable statutory royalty rates. Further, the assets have a loan-to-value ratio of about 52%, with a cashflow that can withstand large haircuts. As on-demand streaming services proliferate and digital platforms emerge, competition for listeners will only intensify and revenue from licensing is expected to grow.
Concord Music Group is the deal’s manager, with FTI Consulting on the transaction as backup manager. CMGI’s management team has decades of experience in managing and acquiring music rights.
Among the deal’s credit challenges is the uncertainty of revenue growth, despite consumers’ shift to streaming their music, instead of owning physical or digital copies of music. Another risk is the deal’s exposure to non-U.S. revenues in the catalog’s 2023 revenues, the rating agency said. The Euro and the Great British Pound account for 23% of total revenue in 2023. The remaining amount is in U.S. dollars and softens the impact of foreign currency.
Other conditions could risk cashflow to the bonds, including potential risks of piracy, dilution of royalty payments due to songs generated by artificial intelligence, and potential changes in the future portfolio composition, Moody’s said.