# Driver 2. Operational Maturity

> 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.

Where Financial Readiness asks whether the deal economics work on the collateral as it sits today, **Operational Maturity asks whether the platform can administer that collateral at the cadence and granularity rated execution requires.** The answer is based on three workstreams that build across acquisitions and surveillance cycles.

## Servicing infrastructure and reconciliation discipline

Rated transactions require reporting at a granularity that exceeds typical fund reporting, including:

- monthly servicer reports,
- quarterly DSCR calculations,
- periodic third-party valuation refreshes,
- surveillance-grade collateral data, and
- the ability to produce loan-tape-quality breakouts on demand.

Meeting those requirements depends on internal systems that capture royalty income at the song or catalog-segment level, reconcile against statements from dozens of intermediaries, normalize across currencies, and produce auditable historical records. Rating agency operational diligence runs deeper still, and its depth is part of why operational infrastructure built ahead of need produces materially smoother rating committee outcomes than infrastructure built reactively in the run-up to debut. Stéphane Rummelhard points to how that review is used on both sides of a transaction:

> "Rating agencies are highly attentive to overall architecture of an emerging platform in the context of their diligence, and investors tend to rely heavily on the rating agencies for servicer diligence."
> — Stéphane Rummelhard, Head of Royalties & Asset-Based Equity, M&G Investments

A platform that has built operational depth ahead of need carries that depth through both the rating and the investor diligence in a single process.

> **Pull Quote:** "As part of the ratings process, diligence extends well beyond cash flow analysis, valuation review and copyright diligence. Rating agencies come onsite to evaluate the operational infrastructure, controls, and internal technology and processes supporting the ongoing ownership and monetization of the assets."
> — Salina Sabri, Managing Director, Barclays

## Seasoning and royalty history depth

Seasoning requirements reflect the rating agency's need for a verifiable base-case cash flow model. **KBRA's publicly stated standard is a preference for at least three years of historical royalty data on the specific collateral, with catalog vintage concentrated in assets older than five years.** The most consistent pre-debut sequencing observed across the rated record is to phase acquisitions so that the largest and most enduring assets are added to the portfolio early in the three-year seasoning window, which gives the rating committee a longer history on the assets carrying the most weight in the cash flow model.

A platform planning for rated execution can use the bilateral phase as a seasoning runway. Aligning acquisition sequencing, royalty reporting depth, and audit cadence with rating-agency standards during that period allows that seasoning window to become a part of the long-term buildout.

## Backup-servicer transferability

Backup servicing is both a contractual structural feature and an embedded test of operational readiness, because the credibility of the arrangement depends on whether the data and processes can transfer cleanly. **The backup servicer is identified at closing to assume catalog administration within 60 to 90 days of a servicer termination event.**

FTI Consulting and Redding Ridge Asset Management are the most active backup servicers in the rated record, and the data handoff requirements they impose define what song-level tracking means as a structural prerequisite:

- song-level data in standardized formats,
- current PRO registration confirmations,
- territory-specific sub-publisher agreements, and
- collection account access instructions.

Platforms whose primary servicer data can be transferred to a successor within the cure period without full reconstruction maintain rating committee confidence, and the arrangement's effectiveness becomes a positive signal that scales across the life of the deal.

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**See also:** `03d - Data Infrastructure.md` (the song-level data layer that operational maturity depends on) · `03c - Legal Architecture.md` (where backup-servicer transferability is contractually formalized) · `05 - Path Forward.md` for the checklist version.
