Guess how Warner Music plans to spend the proceeds from its IPO?

| About: Warner Music (WMG)

Warner Music expects to raise $625 million in its upcoming IPO.  If you are curious about what the company plans to do with all that money, here are some details from the S-1:

Selling Stockholders (all are private equity investors):

  • Thomas H. Lee Partners
  • Bain Capital
  • Providence Equity Partners
  • Music Capital Partners

Underwriters (in order of importance):

  • Goldman Sachs
  • Morgan Stanley
  • Lehman Brothers
  • Merill Lynch
  • Deutsche Bank Securities
  • Banc of America Securities
  • Citigroup

Use of Proceeds:

  • $209 million to redeem selling shareholders' PIK Notes
  • $265 million to redeem selling shareholders' Floating Rate Notes
  • $100 million to redeem 35% of selling shareholders' Discount Notes
  • $44 million for fees and expenses from the IPO (including the underwriters discount)
  • $7 million for general corporate expenses

Quick comment: To sum it up, the private equity investors and underwriters mentioned above will receive virtually all of the proceeds from this offering.  Seven million dollars are allocated for general corporate expenses, but those will probably get swallowed up by other IPO expenses.  Here's a quote from the filing:

We will not receive any of the net proceeds from the sale of shares of our common stock by the selling stockholders. The selling stockholders will receive all net proceeds from the sale of shares of our common stock offered by them under this prospectus.