Investment firm Carlyle poised to launch $464m bond backed by music copyrights

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Bloomberg broke a news story earlier this week about investment firm Carlyle Group launching a $464m bond supported by a portfolio of music rights owned by Carlyle-backed Litmus Music, which launched in 2022.

Bloomberg’s story says the bond is the “first securitization of music royalties” from Litmus and adds: “The bonds have a 40-year maturity, with an anticipated repayment date of five years and are backed by a music portfolio valued at over $750 million, [an insider] said. A representative for Carlyle declined to comment.”

Litmus was launched with $500m backing from Carlyle’s Global Credit Platform to acquire and manage music rights, either publishing rights (copyright in a song or piece of music itself) and publishing rights, which cover a specific recording of musical work. It also has creative management and/or financial advisory partnerships with artists including Katy Perry and Randy Newman.

A longer analysis of the deal in Music Business Worldwide observes: “Carlyle’s reported bond sale marks one of the latest rights-backed securitization deals in the music industry… In November, Blackstone’s Hipgnosis successfully completed a $1.47 billion music rights asset-backed securities transaction (i.e. bond offering). In October, Concord closed an $850 million Asset-Backed Securities transaction to “fuel strategic growth and acquisitions”.

The article goes on to cite a number of other examples of music rights’ owning companies securitising their portfolios.

Securitisation of such ‘long-tail’ rights as copyright is not new. Indeed, it is nearly 40 years since Iconic British music artist David Bowie launch the first bond backed by music rights, back in 1987. As this BBC article from 2016, “’Bowie bonds' - the singer's financial innovation”, reports:

“The securities, which were bought by US insurance giant Prudential Financial for $55m (£38m), committed Mr Bowie to repay his new creditors out of future income, and gave a fixed annual return of 7.9%.”

Quoting a Financial Times article, the BBC reported that Bowie “struck a deal with record label EMI which allowed him to package up and sell bonds on royalties for 25 albums released between 1969 and 1990 - which included classics such as The Man Who Sold The World, Ziggy Stardust, and Heroes.”

Bowie is understood to have used some of the funds to buy back rights to other works he created from an old manager he had parted ways with.