Investment firm KKR is set to turn a catalogue of 65,000 songs – including hits from The Weeknd, Stevie Nicks, and Childish Gambino – into bonds as it looks to sell more than $732m (£542m) of asset-backed securities supported by publishing and sound recording royalties.
Late last year, KKR – via its new Chord Music venture – acquired a large portfolio of rights from Kobalt for $1.1bn (£814m).
According to reports from Bloomberg, KKR is now securitising that catalog into bonds, and seeking a rating for them.
The Kroll Bond Rating Agency reportedly expects to give the deal a grade of ‘A’, the sixth-highest possible rating and said that future growth streaming could increase cash flows for the assets.
However, this isn’t the first time music has turned into a bond.
Music legend David Bowie, alongside businessman David Pullman, launched ‘Bowie Bonds’ in the late nineties.
This bond was a unique type of asset-backed security, which used royalty streams as collateral based on current and future album sales and live performances.
Nonetheless, they struggled to gain momentum, and Bowie’s bonds returned the full $55m investment gained from investors, plus an agreed rate of interest.
In 2022, music investment has had a new lease of life, and the success of the likes of Hipgnosis Songs Fund is a testament of how the way investors think about music is changing.
Alice Enders, Director of Research at Enders Analysis, told City A.M. that the deal is big news for the music industry, and said: “Catalogues are uniquely suited to being high quality “bonds” due the stability of the return due to their scope, as well as the upside from streaming.”
But, she did raise the fundamental question of who would manage the rights to produce the income to bond holders.
The new bond offering is being led by Credit Suisse and KKR.