KBRA assigns preliminary ratings to Hipgnosis Music Assets 2022-1 L.P., a music royalty ABS transaction.

MUSIC 2022-1 represents Hipgnosis Songs Assets (Delaware) L.P.’s first music royalty securitization. MUSIC 2022-1 will be collateralized by royalties from a music catalog (the Catalog) of premium content from over 950 songs across five sub-catalogs from top artists and songwriters, including Justin Timberlake, Nelly Furtado, and Leonord Cohen. Royalty payments include publishing rights and sound recording rights. An independent third-party valuation firm (Valuation Agent) valued the Catalog at $341.0 million using a discounted cash flow method based on cash flow forecasts and a discount rate of 7.0%. This valuation does not give any credit to revenue generated by name, image, and likeness (NIL) rights. The catalog is administered by multiple administrators including Sony Music Group and Universal Music Publishing Group.

The Notes pay interest on a semi-annual basis and are not scheduled to pay down principal prior to the anticipated repayment date (ARD) in May 2027. Prior to the ARD, the only required principal payments are to maintain compliance with the borrowing base requirement which is a function of the note advance rate and the collateral value derived from the present value of the Valuation Agent’s annually updated valuation.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

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Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

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