Lyric & Northleaf Launch $300M Bond Backed by Pete Townshend, Tim McGraw Royalties

Northleaf Capital Partners will raise $303.8 million through the sale of bonds backed by music royalties of The Who’s Pete Townshend, country star Tim McGraw and other artists in Spirit Music Group’s wide-ranging collection of music rights.

The bonds will be backed by over 52,000 assets, primarily compositions but also recordings, that represent a sub-section of Spirit catalog, according to Ross Cameron, a partner at Lyric Capital Group, a private equity firm and Spirit’s financial sponsor. The sale is a “joint effort” of Northleaf and Lyric that provides “a replacement” for another debt facility, says Cameron, who co-founded Lyric in 2019 with managing partner Jon Singer, Spirit’s former CEO and current chairman.

The partnership with Northleaf, which invested $500 million in Lyric in October, “puts Spirit Music Group in a position to continue to do what they do best — service the writer community [and] be an independent publisher,” says Cameron. Lyric’s management-led buyout of Spirit used $350 million, including $280 million in equity by the Morgan Stanley Alternative Investment Partners, to recapitalize the company.

While some publishing investors have sold equity in recent years to build war chests, the concept of securitizing music assets — selling bonds backed by music royalties — gained stature in 1997 when investment banker David Pullman sold David Bowie raised $55 million selling 10-year bonds backed by David Bowie’s publishing and master recording royalties. Pullman went on to sell bonds backed by the publishing assets of James Brown, the Isley Brothers, Ashford & Simpson, and the Holland-Dozier-Holland songwriting catalog. Bowie didn’t have great timing, though: U.S. recorded music revenues peaked in 2001, leading ratings agencies to downgrade the bonds, although they were paid off on schedule in 2007.

Northleaf’s bonds, which will carry an investment-grade A rating by Kroll Bond Rating Agency, should appeal to investors who increasingly see music royalties as safe and recession-proof assets. In just the last four years, independent companies such as Spirit, Hipgnosis Songs Fund, Concord Music Group, Round Hill Music and Primary Wave Music have raised and spent billions of dollars on primarily publishing rights. The major music companies, too, are snapping up songwriting and recording catalogs by the likes of Bob Dylan (Universal Music Publishing for between $375 and $400 million), Paul Simon (Sony Music Publishing for an undisclosed sum) and Bruce Springsteen (Sony Music for more than $500 million).

In its 26-year history, Spirit has amassed a catalog of over 100,000 songs, including 800 hits, featuring rocker Billy Squier (“The Stroke,” “Lonely is the Night”), jazz great Charles Mingus, T. Rex (“Get It On (Bang a Gong)”), James William Guercio (producer of albums by Chicago and Blood, Sweat & Tears), Graham Nash (of The Hollies and Crosby, Stills and Nash) and composer Henry Mancini (“Moon River,” “The Pink Panther Theme”). In the last two years, Spirit acquired the songwriting catalogs of Kara DidGuardi (hits by Pink!, Katy Perry and Carrie Underwood) and Ingrid Michaelson (“The Way I Am” and “Girls Chase Boys”) as well as some of McGraw’s master recordings.