Warner Music Group is currently selling $250 million in bonds to help pay for two undisclosed acquisitions it has agreed to make.
The company said it has completed one purchase already for certain assets and has reached an agreement in principle related to certain other music and music-related properties.
The company says the combined acquisitions will cost the company $338 million and that in addition to the $250 million bond offering, it will also use $90 million in cash on hand to fund the deals. The company noted that the closing of the second acquisition is subject to negotiating a definitive agreement, which is expected to occur after the bond offering is completed.
In disclosing the debt offering, the company has given an advance preview of its 2020 year-end financials — expected to be announced in late November — which show that even with the economic downturn due to the COVID-19 pandemic, revenue will fall less than 1% from last year’s company total of $4.475 billion.
WMG says it expects total revenue to come in at $4.435 billion (down 0.9%) to $4.485 billion (down 0.2%), for the year ended Sept. 30. Further, the company breaks out revenue and estimates recorded music operations will range from $3.795 billion to $3.825 billion, versus $3.84 billion last year, which means a decline of 0.4% to 1.2%. But music publishing will show a gain to between $645-$665 million, compared to last year’s total of $643 million (an increase ranging from 0.3% to 3.4%).
Due to previously announced charges of $593 million in the form of non-cash stock-based compensation expenses; and for $90 million in costs associated with its public stock offering in June, the company is projecting that operating income before depreciation and amortization (OIBDA) will come in at $20 million to $40 million for the year, a huge drop from the $625 million in OIBDA posted last year. On the other hand, adjusted earnings before interest, taxes depreciation and amortization is expected to improve to $825-$845 million from the $737 million reported for the year ending Sept. 30, 2019. That represents an increase ranging from 11.9% to 14.7% over the prior year.
The WMG preliminary results have not yet been audited by KPMG, the company’s independent public accounting firm.
Getting back to the balance sheet, the new notes carry 3% in interest payments and mature in 2031. In total, that means Warner has about $3.35 billion in debt on its balance sheet currently, given that the company says that as of Sept. 30 the company debt stood at $3.1 billion.
In August the company sold about $550 million in notes, with proceeds used to pay a portion of the company’s senior term loan facility and other general corporate purposes. The company says this subsequent debt offering is now considered a part of the previous debt offering and will have the same seniority status that offering had. In general, the WMG is very active in refinancing its debt in order to achieve lower interest rates that results in less debt service. But as it does that, it also has allowed debt totals to inch up.
WMG’s stock closed at $29.26 today (Oct. 19), 5 cents lower than the previous day’s close of $29.31.