Sesac Inc., a performance-rights company, plans to sell $300 million of bonds linked to licensing agreements, copyrights and royalty payments for artists from Bob Dylan to Neil Diamond.
The offering, being arranged by Goldman Sachs Group Inc., will be rated BBB- by Standard & Poor’s, the rating company said in a July 31 report. The Nashville, Tennessee-based company will use the proceeds to refinance debt and pay a dividend to the owner, as well as cover transaction costs, according to S&P.
Companies have issued about $132 billion in asset-backed securities tied to consumer and business borrowing in 2012, with auto debt accounting for $63 billion of deals. Investors seeking out higher yields with the Federal Reserve keeping its target rate for overnight loans between banks at zero to 0.25 into a fourth year are being drawn to unusual deals such as the Sesac offering, according to Chandrajit Bhattacharya, a debt strategist at Credit Suisse Group AG.
“The hunt for yield is driving investors toward these assets,” New York-based Bhattacharya said in a telephone interview. “They are still one of the more yield-y asset classes in ABS.”
Dylan, who signed a recording contract in 1961, accounts for 7 percent of Sesac’s royalty expenses, S&P said in the report for investors.
Royalty payments connected to performances rights for copyrighted music have shown to be “relatively insulated from economic downturns,” according to S&P. Still, the company doesn’t have an exclusive right to license public performances for its affiliates, and the seasonal changes in royalty receipts may lead to volatile income for the bond payments, the New York-based rating company said in its assessment of the deal.