Let’s Dance: the Bowie Bonds

Let’s Dance: the Bowie Bonds

The death of David Bowie reminded the world of finance that not only was he a very talented and justly famous musician, he was also the source of a significant financial innovation.

In 1997 David Bowie securitised (or securitized) the rights to 25 of his albums.  This was the first securitization issue that involved the security of, and cash flow from, music rights.   The investment banker David Pullman, who originated the deal, became very well known as a result of it.

Under the deal, Bowie gave away his rights to royalties for 25 albums selling about 1 million copies a year and in return received a $55m gross payment from investors who bought the bonds.  Investors received bonds paying a 7.9% coupon for 10 years—a good interest rate at the time.

By structuring it this way as opposed to taking a loan or signing a 10 year distribution agreement, Bowie was able to receive the cash up front, he retained ownership of the copyrights (which he would only lose if the bonds defaulted) and he avoided tax he would have paid on a sale of the copyrights.

Bowie may also have understood that the value of recorded music was falling: he was something of an internet visionary in the music business.  Although subsequent music securitisations (securitizations) were done, the falling value of the recorded music market has precluded it becoming a common type of security.  However securitisations of intellectual property in areas such as biotechnology have remained a feature of capital markets.

We have written a much longer pieced linked Bowie Bonds going through the transaction in more detail and giving some sources of information. However BPP also offers a number of both classroom and online courses which are relevant to the world of bonds and of securitisation— unfortunately we do not offer any courses on how to become a famous rock star.

A list of sources is included below.  In addition, BPP Professional Development offers a number of courses, both full day PD courses and online modules.

Click herefor more details.

In particular under bonds

There are a number of courses including Introduction to Bond Markets, Advanced Bond Markets and Introduction to Securitisation.

At an introductory level we have several courses in particular The City and Financial Markets an Introduction (general overview of how finance works) and Capital Markets an Introduction (2 day course reviewing the main capital market products such as bonds and equities).

To find out more about our in-house training visit the website or email corporatebusinessteam@bpp.com

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