Warner Music Group (WMG) has announced that it will offer $550 million worth of senior secured notes to investors.
The Big Three record label detailed its plan to raise capital via secured notes this morning, in an official release. Through its wholly owned WMG Acquisition Corp. subsidiary, Warner Music will attempt to generate more than half a billion dollars, with the corresponding notes set to mature in February 2031. This latest round of senior secured notes arrives on the heels of WMG’s issuing a $535 million tranche in June, shortly after returning to the stock market following nearly a decade of entirely private ownership. Those senior notes will mature in 2030.
As is typical in private debt offerings, only “qualified institutional buyers” and certain foreign investors will be eligible to purchase these newest notes. WMG intends to use the funds “to repay a portion of its senior term loan facility,” besides covering “certain other related fees and expenses.” The Access Industries-owned label would then put any remaining funds towards “working capital” and “general corporate purposes,” per the release.
WMG shares finished the day at $28.87 apiece, representing a small uptick from their previous closing value.
Yesterday, we covered the New York City-headquartered company’s third-quarter fiscal year 2020 earnings report. Predictably, given the COVID-19 pandemic’s considerable impact upon the economy and the music industry in particular, WMG suffered a small (4.5 percent) year-over-year revenue drop and heightened operating losses. However, digital recorded music earnings jumped eight percent from Q3 FY 2019, and Warner Chappell’s digital-publishing income grew an impressive 38 percent, compared once again to the same period in 2019.
And as part of a conference call delivered alongside this earnings report, Warner Music CEO Stephen Cooper provided an interesting take on leading music streaming service Spotify’s multimillion-dollar podcasting investments (including in programs like The Joe Rogan Experience and a criminal justice podcast from Kim Kardashian West). Far from viewing the pivot as a negative or a potential threat to Spotify’s relationship with rightsholders, Cooper hopefully suggested that podcasts could “create appeal to a broader audience,” with listeners frequently switching between them and music.
Moreover, the 73-year-old WMG head specified his belief that music will always serve as Spotify’s foundation and core offering. According to the Stockholm-based platform’s newest financial performance disclosure, about 60 million monthly active users (of nearly 300 million MAUs) listen to podcasts. Lastly, Cooper signaled an openness to signing podcasters, but also said that WMG hasn’t “really found anything yet.”