Now Hipgnosis Songs Fund locks in rate of interest swaps, offering ‘long run certainty’ to value of borrowing
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Hipgnosis Songs Fund (HSF) has efficiently accomplished its beforehand introduced 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), introduced earlier this week.
By way of rate of interest hedging, firms with loans are capable of swap a variable rate of interest for a hard and fast charge over a time period.
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 package deal.
That prompted the corporate to overview its leverage construction on the time because it sought to ease its rate of interest threat.
Stated overview resulted in a five-year $700 million revolving credit score facility introduced 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.
Because 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 complete, $340 million will likely be hedged till the RCF matures on September 30, 2027 at a hard and fast charge of 5.67% together with debt margin.
An additional $200 million will likely be hedged till January 3, 2026 at a hard and fast charge of 5.89%, together with debt margin.
The steadiness 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 charge of the London Interbank Supplied Fee (LIBOR).
On the time of publication, the one-month LIBOR sits at 3.185% – which means that, with out its new RCF and glued rates of interest, Hipgnosis would at present be paying a 6.43% charge towards its debt.
With its new charge swaps now secured, HSF has protected itself towards the potential for the LIBOR (itself a mirrored image of rates of interest at numerous world 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 out to be more and more unpredictable throughout the course of 2022, these new agreements present long-term certainty and a secure platform to make the most of the music trade’s tailwinds.”
“As debt markets have turn out to be more and more unpredictable throughout the course of 2022, these new agreements present long run certainty and a secure platform to make the most of the music trade’s tailwinds.”
Merck Mercuriadis, Hipgnosis Track Administration
HCF clarified at the moment 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 concerning 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 firms which can 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 shaped through $1 billion in backing from non-public fairness large Blackstone in 2021.Music Enterprise Worldwide