HarbourView Equity Partners, the Newark, NJ-based investment firm that has acquired rights to music by Wiz Khalifa and Fleetwood Mac’s Christine McVie, among many others, raised approximately $500 million through an asset-backed securitization [ABS], the company announced Wednesday.
The private ABS, backed by royalties generated by its music catalog, was led by global investment firm KKR. Investment accounts advised by Kuvare Asset Management also participated. Guggenheim Securities was the structuring advisor, and Guggenheim Securities and Barclays acted as co-placement agents.
“We are grateful to KKR for working with us to deliver a flexible and innovative financing structure that will support HarbourView in expanding its reach,” HarbourView founder and CEO Sherrese Clarke Soares said in a statement. “This capital will allow us to further our mission of investing in assets and companies driven by premier intellectual property while striving to ensure that creators are appropriately valued for their contributions to the world.”
“This transaction is a testament to the scale and versatility of our High-Grade Asset-Based Finance [ABF] strategy, which is a fast-growing segment of our private credit business,” Avi Korn and Chris Mellia, co-heads of U.S. ABF at KKR, said in a statement. KKR’s ABF segment has amassed approximately $48 billion in assets under management since 2016. “Music IP is one of many areas where we see opportunity and we are pleased to finance a scaled and high-quality portfolio in this space.”
Founded in 2021, HarbourView launched with $1 billion of financial backing from investment giant Apollo Global Management. The company increased its buying power in December by increasing its credit facility by $100 million to $300 million. To date, it has acquired over 50 catalogs — including Brad Paisley, Jeremih, Nelly, Luis Fonsi and Eslabon Armado — and has $1.6 billion in regulatory managed assets.
The ABS will give HarbourView additional ammunition to pursue music rights. When a music company raises money through an ABS, it sells debt that will be repaid by royalties from its music catalog. A large music catalog filled with established songs provides to type of diversified, predictable income that’s attractive to investors. Music companies often prefer an ABS because it tends to have a higher loan-to-value ratio than traditional debt. That means the music company can raise more funding from a specific portfolio through an ABS than a bank would be willing to lend against the same assets.
A handful of companies have raised enormous sums of money through music royalties ABS deals in the past two years. In 2021, Lyric and Northleaf launched a $304 million ABS backed by 52,000 assets in Spirit Music Group’s portfolio. In 2022, Concord did a $1.8 billion ABS and Chord Music Partners, a venture of KKR and Dundee Music Partners, raised $733 million. Most recently, Kobalt raised $267 million in February through a security backed by publishing royalties from a 5,000-song catalog.
The growth of the music streaming market has helped create the current climate for music-backed ABS deals — and should result in more deals in the future. A large music catalog’s streaming royalties makes music assets “more suitable” for securitization, ratings agency S&P Global wrote in February. “The uptick in global music industry revenue over the last several years, and the desire of market players to diversify funding sources suggests that we may continue to see more of these types of transactions in the coming years.”