Hipgnosis secures debt refinancing amid 'unpredictable' market conditions

Hipgnosis secures debt refinancing amid 'unpredictable' market conditions

Hipgnosis Songs Fund has secured refinancing of the company's debt facilities. 

The company has entered into a new revolving credit facility with a commitment of $700 million, which runs for five years until September 2027. The facility will be used to refinance the company’s pre-existing debt and for working capital purposes. The initial margin will be 2.00%.

In accordance with Hipgnosis’ investment policy, any borrowing will not exceed 30% of the value of the net assets.

In addition, Hipgnosis is in advanced talks to fix the majority of its interest rate exposure by entering into interest rate swaps to hedge the interest on the company's drawn debt. 

City National Bank was lead arranger and sole bookrunner for the new debt facility with Truist Securities, MUFG Union Bank, NA and Fifth Third Bank as co-leads.

As reported in the financial results earlier this year, Hipgnosis gross debt was $600 million. The credit margin on this debt was 3.25% over a floating rate based on the London Interbank Offered Rate (LIBOR). Net debt as a percentage of operative NAV in March 2022 was 25.4%.

Merck Mercuriadis, CEO and founder of Hipgnosis Song Management, 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 [the listing name of the company] and will deliver value to our shareholders as income from  our portfolio of songs increases."

Chris Helm, CFO of Hipgnosis Song Management, said: "Our new debt facility reduces the interest margin and provides added flexibility and headroom for the company. This is a strong commitment from both our new and old lenders and we would like to thank them for their support."

Jim Irvin, SVP, City National Bank, said: "We are extremely optimistic about Hipgnosis Songs Fund's growth and potential, which is why City National Bank is pleased to provide debt refinancing. The new revolving credit facility will reduce the margin on the company's debt at a time of interest rate volatility and ensure SONG delivers superior value for shareholders into the future."


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