KBRA assigns preliminary ratings to Hi-Fi Music IP Issuer II L.P., Series 2022-1, Class A-2 Notes issued by Hi-Fi Music IP Issuer II L.P. (“Hi-Fi”), a music royalty ABS transaction.

This transaction is the first music royalty securitization of KKR Credit Advisors (US) LLC (“KCA”). KCA is a subsidiary of KKR & Co., a leading global investment firm. The Catalog was owned by Kobalt Capital Limited and administered by Kobalt Music Publishing, a music publishing company. An independent third-party valuation firm valued the Catalog at $1.127 billion. This valuation does not give any credit to revenue generated by name, image and likeness (NIL) rights. The Catalog’s income includes publishing royalties, sound recording royalties, and recoupments from artist advances.

The transaction has only one class of Notes in the current series. The Notes pay interest on a quarterly basis and are not scheduled to pay down principal prior to the anticipated repayment date (ARD) in five years (February 2027), at which time the Notes pay down sequentially. Prior to the ARD, principal payments are required to be made with available funds if necessary to maintain compliance with the class borrowing base which is a function of the note advance rate and the collateral value derived from the present value of the valuation agent’s annually updated valuation.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

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Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

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