Hipgnosis Songs Fund Limited (LSE:SONG), which buys up the rights to the back catalogues of musicians, said it entered into a new revolving credit facility (RCF) with a commitment of US$700mln which runs for five years until 30 September 2027.
The UK-listed investment company said the facility will be used to refinance its pre-existing RCF and for working capital purposes.
Hipgnosis also revealed that it is in advanced talks to fix the majority of its interest rate exposure by entering into interest rate swaps to hedge the interest on its drawn debt.
Interest on the new facility is based on the Secured Overnight Financing Rate (SOFR), published by the New York Federal Reserve, plus a margin of between 2.00% and 2.25% depending on the gross drawn debt. The initial margin will be 2.00%, the company said.
Merck Mercuriadis, CEO and founder of Hipgnosis Song Management, the fund’s investment adviser, said: "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.”
"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."
City National Bank was lead arranger and sole bookrunner for the new debt facility with Truist Securities, Inc., MUFG Union Bank, N.A. and Fifth Third Bank as co-leads.