The financing Truist led was as complex as Kobalt’s business—and it took a team effort to finalize. CJ leveraged Truist’s breadth and depth to bring in teams from credit, credit delivery, leveraged finance, asset securitization, industry investment banking, and risk management.
The first hurdle was putting in place a new credit facility that allowed the transfer of assets—a prerequisite for the ABS transaction. Truist Securities’ leveraged finance team began by utilizing the Media, Telecom & Entertainment Investment Banking team’s music industry experience to educate lenders on the difference between owned and administered intellectual property (IP). When a company owns the IP, it can benefit from it in perpetuity. But with administered IP, the contracts are finite.
Kobalt had both, but since the credit facility was loaned against Kobalt’s administered IP, the Truist team needed to illustrate for other lenders that those administration contracts could generate cash flow similar to that of owned IP. That allowed the team to lock in the lenders needed to complete the $450 million syndicated credit facility.
Jeff Tuckel, managing director of Financial Sponsor Investment Banking at Truist Securities, helped ensure this multifaceted financing solution met the objectives of both Kobalt and its owner, Francisco Partners.
“With owned IP, there’s a standardized approach to valuation and how much you can lend against it,” says Jeff. “They needed financing that was creative, because this wasn’t a cookie cutter borrowing base against IP valuation.”
Once the credit facility was in place, Truist’s asset securitization team stepped in to complete the $267 million ABS transaction based on Kobalt’s owned IP. Charlie Dann, director of Asset Securitization at Truist Securities, led the charge.
“This was the first ABS in the music industry since 2022,” says Charlie. “A majority of the ABS market is tied to consumers in some way—mortgages, autos, student loans, credit cards—and those are all vulnerable to macroeconomic stress. Music’s resilience has made it an attractive investment.”
CJ notes that Truist’s industry expertise also helped solidify investor interest. “There’s a reputation that we’ve built in the music industry that we take very, very seriously,” he says. “Investors like knowing that we’re a firm that has industry expertise, and they trust the transactions that we bring to the market.”
