# Driver 5. Governance

> Part of the *Music ABS and Institutional Readiness* knowledge base, Part III (The Five Drivers). See `03 - The Five Drivers (overview).md` for the driver framework and `INDEX.md` for the full pack map.

Governance binds the other four drivers together over the life of the deal, **acting as the oversight structure that allows rating committees, anchor investors, and counterparties to trust that the operational, legal, and data infrastructure built before debut will hold under stress and across successive series.** The surveillance and disclosure expectations that evolved in adjacent markets, most prominently around the Hipgnosis Songs Fund 2024 take-private, have raised the floor on governance for everyone, and the strongest issuers now approach the standards of registered investment advisers (RIAs).

## Board structure and senior leadership

Rated execution requires institutional investors to underwrite not only the collateral but the governance regime around it. That underwriting covers:

- an independent or appropriately constituted board structure,
- identifiable senior leadership with relevant track record and tenure, and
- an internal control environment capable of supporting the representations and warranties made in offering documents.

Allocators and rating committees both weigh governance signals heavily. **Turnover at the senior level, the absence of independent oversight, dependence on a single key person, or unresolved disclosure issues will weigh on rating committee outcomes regardless of catalog quality.**

## Audit and internal controls

Royalty history becomes credible to a rating committee only when audited financial statements and a documented internal control environment sit underneath it, which is why the seasoning question and the audit question move together.

- Funds that have operated under bilateral private credit reporting requirements typically arrive at the rated market with audit-ready financials already in place.
- Funds that have operated under fund-level audit-only frameworks frequently need to extend the audit boundary to the catalog operating entity before a debut transaction is feasible.

The extension takes one to two audit cycles to complete, which is part of why specialty counsel and auditor engagement at the structuring-planning phase is materially less disruptive than at the marketing phase.

## Investment committee and valuation methodology

Independent third-party valuation, on an annual or more frequent cadence, is the governance counterpart to the operational maturity dimension covered earlier: **operational maturity produces the underlying data, while governance produces the methodology and independence that make the resulting valuation credible to a rating committee.**

What separates a robust valuation regime from a fragile one comes down to three elements working together:

1. multiple independent valuations,
2. a formal investment-committee structure with documented conflict-of-interest policies, and
3. transparent methodology disclosure.

The Hipgnosis Songs Fund 2024 take-private and the Shot Tower valuation reassessment that surrounded it sharpened market attention on each of these elements. Following that episode, governance structures separating financial advisors from valuers became more explicit across the sector, and multi-appraiser averaging is emerging as standard practice for larger transactions.

Rating committee credibility and investor LTV comfort now depend on visible valuation governance, not just on the headline valuation figure itself. Platforms that have formalized investment-committee structures, conflict-of-interest policies, and transparent valuation methodologies maintain pricing optionality through rate cycles that platforms with looser governance do not.

For a platform building toward rated execution, valuation governance is a structural deliverable in the bilateral phase. Funds should engage an independent valuer with a documented methodology from the first meaningful acquisition, separate the financial advisor function from the valuation function from inception, and build investment-committee oversight into the fund's charter. By implementing these practices, the governance structure becomes visible to allocators and rating agencies well before the rated transaction is on the calendar.

## Investor and counterparty relationship depth

Recurring rated issuance depends on strong investor and structuring-side relationships as much as on the right structures. The institutional ABS buyer base for music royalty paper is anchored by insurance general accounts, with **Athene, Pacific Life, Kuvare, Global Atlantic, PPM America, Aflac, and Nuveen** documented across the rated deal record.

QIB-only distribution under Rule 144A implies **minimum ticket sizes in the $5 to $10 million range** for these accounts. Rated transactions clear most efficiently when the issuer has relationships with enough QIB accounts to populate an order book at scale and understands investment committee requirements, NAIC capital treatment, and hold-to-maturity portfolio construction logic, all of which platforms more credibly demonstrate when they have operated under bilateral or warehouse facilities first.

Paul Sipio describes the warehouse-to-securitization path as an explicit sequencing choice for newer platforms:

> "Warehouse facilities serve as a useful tool that can hold certain music rights that have been acquired until there is enough scale and diversification in that portfolio of assets where you are prepared to go to the securitization market."
> — Paul Sipio, Managing Director, Apollo Global Management

Strategic partnerships with institutional anchors are a complementary path several newer-vintage platforms have used to compress the learning curve into the rated market. Lynn Hazan, Co-Managing Partner of Influence Media, describes how BlackRock's anchor partnership shaped Influence's preparation for its private ABS:

> "BlackRock had a big impact on us in helping us to set up the structure of our platform. They helped us with our fund administrator, reporting requirements, audit and tax service providers, etc. And then specifically when it came to the ABS market, their capital markets group really guided us. And because they're partners with us, not only did they help guide us, but even selecting the banks we used, selecting the legal providers, they added value in all of that with their expertise."
> — Lynn Hazan, Co-Managing Partner, Influence Media Partners

Anchor relationships across the rated record take different forms, and each brings distinct capabilities to the platform it supports. **BlackRock's** role with Influence Media centered on capital markets guidance and operational structuring. One of the things **M&G Investments** brings to Seeker Music is the character of its capital base. Capital markets guidance, operational structuring, and long-duration capital each address a different part of reaching and sustaining rated execution, and the range of anchor models in the market gives a platform a wide set of partners able to help it through the process rather than a single template to fit.

On the structuring side more broadly, **Apollo's Capital Solutions, Atlas SP, Redding Ridge, MUFG, Barclays, and Goldman Sachs** have all played a role in transactions across the rated and private spectrum, and practitioners have described continuity of the structuring relationship across vintages as a meaningful determinant of execution efficiency on repeat issuance under a master trust.

> **Pull Quote:** "Most music investment vehicles are sponsored by closed-end funds with finite investment periods and defined exit horizons. By contrast, M&G's Life business brings long-term, patient capital to the asset class. That enables Seeker to be highly selective and invest only where we see compelling relative value."
> — Stéphane Rummelhard, Head of Royalties & Asset-Based Equity, M&G Investments

## How the Five Drivers Interact

The five drivers do not weight equally in a rating committee's decision, but each is required, and gaps in any single driver constrain the position the platform can occupy on the rated spectrum. Financial readiness is necessary but not sufficient: a platform can hold $1 billion of clean, active publishing rights and still fail rating committee on operational, legal, data, or governance grounds. Conversely, a platform whose collateral profile differs from the legacy-vintage standard can still reach investment-grade execution when the other drivers compensate, as Duetti's private rating against a broadly diversified independent-artist catalog with shorter seasoning history has demonstrated. Duetti cleared the rating bar by building operational, legal, data, and governance infrastructure to a standard that matched the scaled legacy platforms, and the diversification breadth of its collateral substituted for the vintage depth that legacy catalogs carry. The framework is therefore dynamic and treating the drivers as a sequence spreads the work across the bilateral phase instead of concentrating it before a transaction. Stéphane Rummelhard lists the workstreams M&G developed with Seeker from inception, spanning acquisition strategy and underwriting standards, rights diligence, metadata and royalty data quality, servicing controls, governance, valuation methodology, legal architecture, and capital structure, noting that "each of these is a long-dated build, and none can be reconsidered in the months before a rated transaction." Started early, that buildout is a manageable runway, and the platforms that begin it during the bilateral phase reach rated execution on a defined timeline.

Operational Maturity, Legal Architecture, and Data Infrastructure are the three buildable workstreams most directly within a fund operator's control, and progress in each builds on the others. Operational reporting depth informs legal-architecture review, which informs data infrastructure design. Thomas Smyth describes the integration challenge directly:

> "The most time-intensive component was not necessarily any one workstream but building a system capable of linking metadata, legal ownership, royalty collection, and cash flow reporting at the individual track and catalog level that could withstand lender and rating agency diligence. This level of transparency is critical in an ABS context because all stakeholders need high confidence in the collateral and need a way to independently verify and monitor these over time."
> — Thomas Smyth, CFO, Duetti

Governance is the meta-layer that allows rating committees, structurers, and anchor investors to trust the other four dimensions will hold over the life of the deal. A committee assesses all five drivers, and a deficiency in one can be mitigated by structure or by strength elsewhere, within limits that depend on how severe the gap is. The framework rewards cumulative buildout rather than penalizing gaps in any single dimension, and the rated record contains multiple examples of a spectrum of paths to investment-grade execution depending on which dimensions a platform has built deepest.

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**See also:** `03a - Financial Readiness.md` (the valuation-discipline thread connects to governance through methodology and committee independence) · `05 - Path Forward.md` for the checklist version · `04 - Outlook.md` for how governance signals carry into surveillance and rating actions.
