Primary Preview: Investors Express Mixed Views on Getty Images’ Bond to Refinance Shutterstock Debt Over AI Fears, Merger Risk

Getty Images’ $628 million high-yield bond has struggled to gain traction this week, according to investors, who cited concerns about the visual media company’s risks related to artificial intelligence disruption as well as its proposed exchange offering and merger with Shutterstock.

Price talk on the $628 million five-year senior secured note led by JPMorgan is coming in the mid-10% area, according to sources. Proceeds from the deal will be used to refinance Shutterstock’s debt in connection with its merger with Getty. Pricing is expected Friday, Oct. 3.

Investors looking at the deal this week said that even with Getty’s offering being the most enticing yield in the market right now, concerns related to AI disruption in the imaging and content creation sector are a significant deterrence given its position as a leading image licensing provider.

Others argued, however, that such AI fears are speculative.

On Sept. 18, Getty disclosed that it commenced an offer to exchange any and all of its $300 million of outstanding 2027 9.75% senior notes for newly issued 14% senior notes due 2028. Some investors flagged that Getty’s 14% one-year exchange offering has weakened interest in its new issue, more so than AI concerns have.

Still, Getty could be one of many companies that faces buy-side reticence for fears of AI disruption. In recent weeks, loan investors have pointed to a trade-off in the secondary market over concerns related to AI.

Getty distributes content through three divisions, according to its Securities and Exchange Commission filings: creative, editorial and other, which includes licensing, music licensing and digital asset management. AI risk particularly poses problems for the creative unit, noted one source, given content creators’ willingness to use AI images. Corporate and media contracts, however, are less susceptible to AI dislodgement.

Several investors noted that companies in the business services sector, for example, as well as “anything with a whiff of potential AI,” have been trading off in the past month. For example, two legal solutions companies, Consilio and Epiq, saw their loan prices decline about 10 points in September over concern of AI, according to sources and Solve data.

One investor cautioned, however, that most companies have still shown little to no material impact from AI in their recent earnings reports, and these price movements are largely preemptive. In general, AI risk is difficult for the market to price in, added another investor this week. Investors may be wary of businesses like Getty as a result of this market uncertainty.

In addition to AI risk, sources flagged the possibility that Getty’s merger with Shutterstock does not get approved by either U.S. or U.K. regulators. In April, the Department of Justice requested a second round of materials for its review of the merger, while the U.K.’s Competition and Markets Authority has set a deadline for its Phase 1 decision on the merger for Oct. 20.

Lastly, investors have flagged the restrictive covenants on Getty’s new 2030 notes. According to an Octus analysis, the covenants on the notes are relatively restrictive and include an “omni-blocker,” but because amendments to the omni-blocker are not included among the “sacred rights,” it could be removed entirely with consent from a simple majority of noteholders.

Despite AI concerns and merger risk, the future synergies between Getty and Shutterstock and lower leverage pro forma have drawn investors to the deal, sources added. As the two largest players in the market, the chance to invest in the combined entity at above-market pricing has also helped fill the book.

Investors said the merger with Shutterstock has helped pique interest in Getty despite the image licensor’s tough credit history. In February 2024, Getty pulled its $1.38 billion term loan B from the primary market after failing to fill the order book.

Getty’s $628 million bond launched with $200 million in reverse interest earlier this week, said one bond investor. A second investor noted that as of today, the book was just over deal size.

Getty and Shutterstock announced in January that the two companies entered into an agreement to combine in a merger of equals transaction. According to the press release, the combined public company will be named Getty Images Holdings Inc. and will have an enterprise value of approximately $3.7 billion, subject to regulatory approvals.

Moody’s Ratings and S&P Global Ratings hold B2/B+ corporate ratings on Getty Images. Moody’s assigned a B1 rating to the proposed $628.4 million senior secured notes and added in its ratings note that the rise of AI has transformed the content-creation market and led to increased competition and challenges for visual content companies such as Getty Images and Shutterstock.

Getty Images’ term loan B due in 2030 was last trading today at 99/98, according to Solve. CLO holders for Getty can be found HERE.

JPMorgan declined to comment. Getty Images did not respond to a request for comment.

Getty’s pro forma capital structure is summarized below: