KBRA releases a research report that serves as a primer on music royalty asset-backed securities (ABS), as well as examines the sector’s credit characteristics, in the context of increased volume of music royalty ABS and heightened interest from market participants.

KBRA has assigned 38 ratings on music royalty ABS across nine transactions since 2020, totaling over $4 billion in issuance.

Key Takeaways

• Music royalty ABS requires a relatively complex infrastructure to manage the underlying collateral of intellectual property (IP). This includes tracking and protecting copyrights, promoting interest and usage, collecting royalties, and distributing those payments to copyright holders.
• Music IP assets are not homogeneous; the asset valuations and the legal diligence are bespoke, dynamic processes.
• Typical ABS structures and collateral composition may evolve over time as the asset class develops. For example, new performance triggers may emerge in addition to traditional debt service coverage ratio (DSCR) metrics.
• KBRA-rated music royalty ABS transactions have exhibited rating stability to date, with none experiencing negative rating drift, as the transactions have generally exhibited favorable collateral performance.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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