Now Hipgnosis Songs Fund locks in rate of interest swaps, offering ‘long run certainty’ to value of borrowing

Hipgnosis Songs Fund (HSF) has efficiently accomplished its previously announced rate of interest swap agreements.

The transfer supplies the corporate with elevated certainty over the price of its debt after it secured a brand new USD $700 million revolving credit score facility (RCF), announced earlier this week.

By way of rate of interest hedging, corporations with loans are capable of swap a variable rate of interest for a hard and fast fee over a time frame.

In July, London-listed HSF famous that rising rates of interest have been driving up the borrowing prices on its maxed-out $600 billion debt bundle.

That prompted the corporate to overview its leverage construction on the time because it sought to ease its rate of interest threat.

Mentioned overview resulted in a five-year $700 million revolving credit score facility announced on Monday (October 3). Citibank was lead arranger on that RCF, which HSF mentioned would assist to curb its rate of interest threat.

HSF on Wednesday (October 5) mentioned it was moreover pursuing – now accomplished – rate of interest swap agreements on its money owed.

On account of these swaps, curiosity on all of HSF’s drawn debt is now fastened at 5.71%, together with debt margin, till January 2, 2023.

From that time on, the corporate will enter into rate of interest swaps to hedge $540 million of its debt.

Of that $540 million whole, $340 million might be hedged till the RCF matures on September 30, 2027 at a hard and fast fee of 5.67% together with debt margin.

An additional $200 million might be hedged till January 3, 2026 at a hard and fast fee of 5.89%, together with debt margin.

The stability stays unhedged after that date to supply flexibility within the operation of the RCF, the corporate added.

HSF’s earlier $600 million facility, in distinction, had a credit score margin of 3.25% over the floating fee of the London Interbank Supplied Price (LIBOR).

On the time of publication, the one-month LIBOR sits at 3.185% – that means that, with out its new RCF and stuck rates of interest, Hipgnosis would at the moment be paying a 6.43% fee in opposition to its debt.

With its new fee swaps now secured, HSF has protected itself in opposition to the potential for the LIBOR (itself a mirrored image of rates of interest at numerous international banks) rising greater in future.

Merck Mercuriadis, Founder and CEO of Hipgnosis Track Administration, mentioned of HSF’s new rate of interest hedging transactions: “Along with the completion of our new Revolving Credit score Facility, executing these swaps concludes our refinancing.

“As debt markets have turn into more and more unpredictable throughout the course of 2022, these new agreements present long-term certainty and a secure platform to reap the benefits of the music business’s tailwinds.”

“As debt markets have turn into more and more unpredictable throughout the course of 2022, these new agreements present long run certainty and a secure platform to reap the benefits of the music business’s tailwinds.”

Merck Mercuriadis, Hipgnosis Track Administration

HCF clarified right now that the price of arranging each the RCF and the rate of interest hedge has been included within the principal quantity underneath the RCF.

This supplies the corporate with certainty relating to the quantity of its fastened curiosity cost obligations over the time period of these contracts.

Rate of interest hedging has been probably the most viable options for corporations which might be coping with tens of millions of {dollars} in debt as central banks all over the world proceed to hike rates of interest in a bid to tame hovering inflation.

Along with Hipgnosis Songs Fund, the Merck Mercuriadis-founded Hipgnosis group consists of funding advisory agency Hipgnosis Track Administration (HSM), and Hipgnosis Songs Capital (HSC).

The latter was formed via $1 billion in backing from non-public fairness big Blackstone in 2021.Music Enterprise Worldwide