Kobalt raises $266.5 million through the sale of a title backed by the publishing rights to a 5,000-song catalog featuring YoungBoy Never Broke Again (aka NBA YoungBoy), AJR, Busta Rhymes and Jessie J.
The securitization is backed by a $410 million listing from Virtu Global Advisors, according to a pre-sale report by Kroll Bond Rating Agency (KBRA) released on Tuesday (February 20th) that gave the Kobalt asset-backed security a preliminary rating of A-.
The bond allows Kobalt to raise capital from the value of the listing and repay investors with the warrants the compositions create. That puts music rights in the company of common asset classes like auto loans, mortgages and credit card receivables — all of which have a contractual obligation to pay — that are often used in asset-backed securities.
The proceeds are expected to be used to fund reserve accounts, pay certain transaction expenses, repay existing debt and for other general corporate purposes, according to the KBRA report.
Kobalt's asset-backed security is the latest in a handful of major securitization deals in the music industry in recent years. From 2021, Concord, Hipgnosis song management, KKR Credit Advisors (with directory owned and managed by Kobalt) and Northleaf Capital Partners have raised money through KBRA-rated music asset-backed securities.
The catalog backing Kobalt's tie-up is diverse but newer than the typical multi-million dollar music asset transaction. About 40% of total publisher net share comes from compositions released since 2019, and about 43% comes from compositions first launched between 2011 and 2018. Less than 3% of total publisher net share comes from compositions from 2000 or earlier.
Almost a third of the catalog – 29% of the last 12 months' royalty collections – may be terminated before the statutory final payment date in 2064, but there will be no termination windows within the next 30 years, according to KBRA. Two-artist catalogs, which represent approximately 1% of the catalog value, are subject to contractual reversal or termination prior to the final payment date. One song is currently subject to a copyright infringement claim that would result in legal fees and reduced cash flow.
Pop music represents 52% of the catalog's value, while hip-hop accounts for 28% and rock accounts for 9%. Revenues from the United States make up 63% of gross receipts compared to 12% for the European Union and 10% for the United Kingdom.
from our partners at https://www.billboard.com/business/publishing/kobalt-fundraising-song-catalog-backed-security-youngboy-1235611784/
