After selling AWAL, Kobalt pays $89m to buy back equity from shareholders

There is a lot riding on the sale of AWAL – and not just for buyer Sony Music Entertainment (SME).

MBW has learned that Kobalt Music Group, which sold AWAL to SME in a $430 million deal in May, has since agreed to buy back a chunk of equity in its company from shareholders, for the cumulative price of nearly $90 million.

According to a UK financial document filed in August, Kobalt is buying back shares of the following amounts, from the following investors:

  • 730,038 Series D Preferred Shares from HEI Inc for USD $59,999,998.13
  • 121,673 Series D Preferred Shares from Section 32 Fund 1, LP for USD $9,999,999.69
  • 60,837 Series D Preferred Shares from Balderton Capital III, L.P., for USD $5,000,040.94
  • 60,837 Series D Preferred Shares from MSD Music Investments, LLC for US $5,000,040.94
  • 60,837 Series D Preferred Shares from Nordic Trident SCSp for USD $5,000,040.94
  • 21,598 Series D Preferred Shares from MSDC Music Investment, LLC for USD $1,775,085.63
  • 16,000 Seri. D Preferred Shares from Pluto’s Holding GmbH for $1,315,000.00
  • 12,168 Series D Preferred Shares from Nya Jorame Holding AB for USD $1,000,057.50 

That’s a total expenditure of $89.09 million.

Kobalt had enough cash on its balance sheet at the end of the last year of its latest public accounts to cover this bill: The firm had $151.5 million in cash and cash equivalents as of the close of June 2020.

However, Kobalt also declared $111.0 million in net liabilities at that point in time, largely because of $191.9 million in outstanding borrowings.

Those borrowings were racked up via a $185 million loan (plus interest), which is due for repayment in 2023.

When contacted by MBW, a Kobalt spokesperson confirmed that the company had recently returned to its shareholders some of the cash that it received from the sale of AWAL (and Kobalt Neighbouring Rights).

UPDATE: A Kobalt spokesperson also confirmed to MBW that, as of today, Kobalt no longer has debt outstanding, and that the company paid off its $185 million loan (and related interest) with the proceeds of the AWAL sale.



Today’s news offers a fresh angle on the story that the UK’s Competitions and Markets Authority has raised concerns about the sale of AWAL to Sony.

As MBW reported earlier this week, the CMA – following the Phase 1 of its investigation into the deal – said it was “concerned that the loss of an innovative competitor like AWAL could, despite continued presence of the other major labels, lead to worse terms for artists and less innovation in the music sector”.

The CMA further suggested that “Sony and AWAL could have competed more strongly with each other in future”, because AWAL was “well-placed to grow its business even further in the coming years”.

Sony has until next Tuesday (September 14) to file a response with the CMA. If it does not do so, the CMA’s investigation will proceed to Phase 2.

“This decision by the CMA is perplexing and based on an incorrect understanding of AWAL’s position in the UK.”

Sony Music’s response to the CMA’s concerns over its AWAL acquisition

Sony Music has already publicly responded to the news of the CMA’s Phase 1 conclusions, noting in a statement: “This decision by the CMA is perplexing and based on an incorrect understanding of AWAL’s position in the UK.

“We strongly believe this transaction is unambiguously pro-competitive and that our investment in AWAL is key to its continued growth, and future success.

“Every other regulatory body that has reviewed this transaction has agreed with our view and approved it quickly. We will continue to work closely with the CMA to resolve any questions they might have.”

Following the sale of AWAL and Kobalt Neighbouring Rights to Sony Music, Kobalt Music Group (KMG) is now the parent of businesses including Kobalt Music Publishing and AMRA, the global digital collection society.

In addition, KMG is parent to Kobalt Capital Ltd, which manages two music royalty funds that have spent over $1.4 billion combined on copyrights.Music Business Worldwide