It is eight months since Universal Music Group was listed on the Amsterdam Stock Exchange.
Today (May 31), the world’s largest music rights holder was awarded its first credit ratings since being listed by two of the world’s three major credit rating agencies.
UMG has been awarded a first-time Prime-2 short-term credit rating and a Baa1 long-term credit rating “with a stable outlook” by Moody’s Investors Service.
In addition, S&P Global Ratings has awarded the company an A-2 short-term credit rating, as well as a BBB long-term credit rating “with a stable outlook”.
In a media statement announcing the assessments, UMG states that they “consider these investment grade ratings to be supportive of its financing strategy and are committed to maintaining an investment grade rating”.
UMG says it was advised by Bank of America during both credit rating processes.
Universal’s valuation announcement comes four weeks after the company announced its financial results for Q1 2022.
Across all its divisions (including recorded music, publishing and more), UMG had revenue in the three months to the end of March. EUR 2.199 billion (USD 2.46 billion).
This was an increase of 16.5% year / year in constant currency, driven by growth across all revenue segments.
Boyd Muir, UMG’s EVP, CFO and President of Operations, commented on the valuation news in a media statement issued today: “We are pleased that the rating agencies have recognized our strong creditworthiness in the initial valuations since our public listing.
“Both agencies highlighted our leadership in the music industry, the best-in-class catalog, recurring and well-diversified revenue streams, and low leverage as key drivers for these solid ratings.
“The Baa1 / BBB rating award is another positive recognition in our early days as an independent listed company.”
“We are pleased that the rating agencies have recognized our strong creditworthiness in the initial assessments since our public listing.”
Boyd Muir, UMG
In a press release explaining its valuation decision for UMG, S&P says the music company “benefits from its top position in the growing music industry, as well as its large and well-diversified global portfolio of recordings and compositions across multiple genres”.
S&P notes that UMG “enjoys stable and predictable revenue, earnings and cash flow thanks to a high share of subscription revenue through streaming”, and that the company’s “unique music library will continue to generate largely predictable and solid earnings, earnings and cash flow”.
Added S&P: “In our opinion, UMG’s low leverage gives the group ample financial flexibility, but we take into account the possibility of large debt-financed catalog acquisitions or significantly higher dividends.”
“The Baa1 rating reflects the company’s strong operating momentum supported by the music industry’s secular growth prospects, driven by increasing consumer adoption of on-demand music streaming platforms, social media apps and other new digital platforms.”
Agustin Alberti, Moody’s
Moody’s, meanwhile, says in its own press release that the rationale behind their rating for UMG reflects “the ongoing transition to a more predictable and recurring revenue profile based on the growth in streaming and publishing revenue”.
The rating agency also cites what it says is, “the secular tailwind of the global music industry’s long-term growth driven by strong consumer adoption of paid subscription streaming services, social media apps and new digital platforms that Moody’s expects to continue, especially in new growth periods. “
Other reasons for Moody’s rating include UMG’s “good track record in supporting and developing artists’ careers through its global network of iconic labels and publishing companies covering 200 markets”, as well as “a best music catalog with good geographical diversity and revenue generation opportunities,” plus , “an experienced management team with a proven track record of adapting to new trends through innovation”.
Among the “factors that could lead to a downgrade or upgrade of ratings” listed by Moody’s, the agency states that “downward pressure may develop if there is a deterioration in the company’s business model that results in a significant, sustained erosion of its leaders. market position, profitability or cash flow generation.
Moody’s adds: “The rating could also face downward pressure if management adopts a more aggressive fiscal policy, makes significant acquisitions or finances large share buybacks with debt.”
Agustin Alberti, Moody’s Vice President – Senior Analyst and Senior Analyst at UMG, said: “The Baa1 rating reflects the company’s strong momentum, supported by the music industry’s secular growth prospects, driven by increasing consumer adoption of on-demand music streaming platforms, social media apps and others new digital platforms, “
“The rating is also supported by UMG’s prudent fiscal policy, which is reflected in its current low leverage and the public commitment to a solid investment ratio.”Music business worldwide
