Lyric Capital Group, owner of Spirit Music Group, has once again reinvented its capital structure with a $500 million investment. The influx comes from a group led by Toronto-based investment management firm Northleaf Capital Partners and includes Caisse de dépôt et placement du Québec (CDPQ) as a significant co-investor.
Specific terms of the deal, which is described as a “strategic alliance” were not disclosed except to say that Northleaf and its investors will hold an unspecified interest in “certain music royalty catalogs managed by Lyric Capital Group.”
In early 2019, the then-newly created Lyric Capital Group — led by managing partner Jon Singer, who also serves as chairman of the Spirit Music Group, and Lyric Capital Group partner Ross Cameron — led a recapitalization of Spirit Music, bringing in some $350 million. That consisted of about at least $280 million in equity by the Morgan Stanley Alternative Investment Partners and an undisclosed amount of debt from Sun Trust Bank, now known as Truist, and Pinnacle Bank.
That 2019 deal took out Spirit Music majority owner Pegasus Capital Advisors and retired about $50 million in debt from the Fortress Credit Corp. Now, a company spokesman confirms that the latest deal takes out Morgan Stanley from the ownership picture.
In the prior 2019 deal, the catalogs carried a $280 million valuation, sources then told Billboard. It’s unknown what valuation this deal comes in at.
Looking ahead, the 25-year-old Spirit Music Group can now continue to build upon its already impressive legacy of evergreen copyrights and present day hit songs, the company said in a statement.
“From day one, Spirit has stayed committed to providing unparalleled service to our songwriters and business partners and we’re proud that the health of our company reflects that promise today,” said Singer in a statement. “This strategic alliance allows us to continue to anticipate our clients’ needs in a constantly evolving market and accelerate our growth strategy of investing in iconic catalogs, elevating new music and serving the needs of the songwriters who entrust us with their life’s work. We are excited to have Northleaf on board who share our vision.”
Spirit claims that its combined catalog now totals over 100,000 songs, including more than 800 hits and includes songs by Pete Townshend, T. Rex, James William Guercio, Graham Nash, Henry Mancini, Marilyn and Alan Bergman, among others.
“Northleaf is the right long-term strategic partner for us as they bring strong creative sensibilities and private markets expertise as well as access to flexible capital to support our growth strategies within the music royalty space,” Cameron said in a statement.
Other songs in the Spirit catalog include works from such songwriters as Billy Squier, Charles Mingus, Doc Pomus, Lou Christie, Louden Wainwright III, Marshall Tucker Band, Phil Coulter, Boz Scaggs, T Bone Burnett, Frank Rogers, Gregg Wattenberg, David Paich, Tim Hardin, Richie Cordell, Jonny Coffer, Zach Crowell, Rami Dawod and James Bay.
“Our collaboration represents a compelling opportunity in the music royalty space alongside a best-in-class operator,” Northleaf MD Michael Morris said in a statement. “This is a rapidly growing and uncorrelated asset class that provides our investors with predictable and growing cash flows.”
Spirit Music also represents such recent tunes as Luke Bryan’s “Waves,” Lainey Wilson’s “Things A Man Oughta Know,” Thomas Rhett’s “Country Again,” Scott McReery’s “You Time,” Drake’s “Way 2 Sexy” and Champagne Poetry.”
“We look forward to supporting the growth of this mature and diverse song catalog of evergreen copyrights,” Northleaf MD Matthew Sparks added in a statement. “Northleaf will continue to expand our music royalty portfolio by adding attractive assets with strong potential, building on our strategic approach and ability to provide flexible capital to support ongoing growth.”
Besides songs, the Spirit Music catalog also owns stakes in masters and some artist royalties, including records by T. Rex, Ingred Michaelson and a stake in some of Tim McGraw’s masters.
“We are pleased to invest alongside Northleaf in a diversified music royalties portfolio composed of firmly established assets under the solid management of Lyric,” CDPQ executive vp and head of private equity and capital solutions Martin Laquerre said in a statement. “This first investment in music royalties under our Capital Solutions strategy will leverage the sector’s positive long-term trends and provide stable cash flows and attractive capital protection for our clients.”
The deal shortly follows Tuesday’s announcement of Blackstone’s new $1 billion partnership with Merck Mercuriadis to acquire music rights and manage catalogs in tandem with Hipgnosis Song Management. Last week Billboard broke news that Kobalt was seeking a $1 billion buyer Kobalt Music Royalty Fund II, possibly with a group of investors that includes private equity firm KKR, and Sherrese Clarke Soares announced her new investment firm HarbourView Equity Partners that’s backed by a reported $1 billion from Apollo Global Management.
Northleaf’s financial advisors for the transaction were Artisan Partners, FTI Consulting and GreensLedge, with KPMG serving as structuring and tax advisor while Latham & Watkins LLP and Torys LLP filled the role of legal advisors. Lyric Capital Group’s exclusive financial advisor and placement agent was Eaton Partners, a wholly owned subsidiary of Stifel Financial Corp. Other advisors to Lyric on the deal included Ropes & Gray’ Barnes & Thornburg, Akin Gump and KPMG.