When Len Blavatnik’s Access Industries bought Warner Music Group in 2011, it took on $3.05 billion in expensive debt. Now investment ratings firm Moody’s has upgraded WMG’s outlook slightly from B2 to B1, but with a “high default risk.”
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Moody’s Investor Service has upgraded Warner Music Group Holdings business credit rating slightly from B2 to B1, which the rating service describes as a “highly speculative’ investment. And while the world’s third largest music group’s outlook is considered “stable,” Moody says that WMG’s risk of defaulting on its loans is “high” (B1-PA).
This slight upgrade from Moodys comes after 3.2% overall industry growth in 2015, following years of decline. Looking forward, Moody’s believes that WMG profits could grow “as a result of lower costs associated with online music subscription and advertising-supported streaming revenue which is now its largest and fastest growing revenue source, underpenetrated markets worldwide for paid music streaming consumption and rising demand for WMG’s music content.”
$3.05 Billion In Debt At Interest Rates As High As 13.75%
But WMG is still saddled with $3.05 billion in debt. Most of it is being carried at an average interest rate of 6.5% and comes due in the next 4 to 6 years. But $100 million of the debt, which come due in 3 years carries a whopping 13.75% interest rate.
The prime business borrowing rate currently sits at near record lows of 2.70%, with many companies able to borrow at prime +1 or 3.70%