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Hipgnosis Songs Fund Secures $700 Million in Debt Refinancing Deal

Hipgnosis Songs Fund Secures $700 Million in Debt Refinancing Deal

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LONDON (CelebrityAccess) – The board of Hipgnosis Songs Fund (HSF), the publicly listed company founded by Merck Mercuriadis, said on Monday (October 3) it has closed on a five-year $700 million revolving credit facility to refinance the existing $600 million in debt and beef up HSF’s working capital.

HSF confirmed that charged interest on the new facility is based on the New York Federal Reserve’s Secured Overnight Financing Rate (SOFR), plus a margin of between 2.00% and 2.25% depending on the size of the firm’s gross drawn debt.  That differs from HSF’s previous deal for its maxed-out $600 million debt facility. The credit margin on that debt was 3.25% over the floating figure of the London Interbank Offered Rate (LIBOR). painted an approximate picture of the difference between these two debt agreements right now:

  • The relevant London Interbank Offered Rate (LIBOR) at the time of writing is 3.14%. HSF’s credit margin on its former $600 million facility was 3.25% over that figure, or 6.39%
  • The NY Fed’s Secured Overnight Financing Rate (SOFR) at the time of writing is 2.96%. HSF’s credit margin on its $700 million new facility is 2.00% over that figure, or 4.96%.

However, following its new $700 million deal, HSF said today that it is in additional discussions to “fix the majority of [our] interest rate exposure by entering into interest rate swaps to hedge the interest on [our] drawn debt”.

City National Bank was lead arranger and sole bookrunner for the new $700 million deal along with Truist Securities, Inc., MUFG Union Bank, N.A. and Fifth Third Bank as co-leads.

Jim Irvin, Senior Vice President, City National Bank, today explained why his company has extended the new $700 million debt package to HSF, despite challenging macroeconomic conditions.

“We are extremely optimistic about Hipgnosis Songs Fund’s growth and potential, which is why City National Bank is pleased to provide debt refinancing,” he said.

“The new revolving credit facility will reduce the margin on the company’s debt at a time of interest rate volatility and ensure SONG delivers superior value for shareholders into the future.”

Mercuriadis, CEO and Founder of Hipgnosis Song Management added: “In an increasingly unpredictable debt market, this deal materially reduces our interest margin and the swaps we hope to close imminently provide long-term certainty and a stable platform to take advantage of our industry’s tailwinds.”

Added Mercuriadis: “The continued growth in streaming and additional revenue streams from digital platforms, irrespective of macroeconomic conditions, coupled with the improved terms of our new RCF is very encouraging for SONG and will deliver value to our shareholders as income from our portfolio of songs increases.”

The wider three-pronged Hipgnosis group has spent about $300 million on music catalogs during 2022 so far.

In addition to Hipgnosis Songs Fund, the Merck Mercuriadis-founded Hipgnosis group includes investment advisory firm Hipgnosis Song Management (HSM), and Hipgnosis Songs Capital (HSC). The latter was formed via $1 billion in backing from private equity giant Blackstone in 2021.

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