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Return of intangible securitization?
Are we seeing a return of the Bowie Bonds? According to a story in the Wall Street Journal (“Bob Dylan and Neil Diamond Become a Selling Point for Bonds“) there is a new bond offering similar to the Bowie Bonds of the late 1990s:
A privately held Nashville, Tenn., company is preparing a $300 million bond backed by the cut it receives as a middleman between music companies and songwriters and the outlets that broadcast their music.
The company, Sesac Inc., has the exclusive rights to the public broadcast or performance of the music of Mr. Dylan, pop singer Neil Diamond, Canadian rock band Rush and jazz singer Cassandra Wilson.
However, don’t expect a major rush to the bond market. S&P gave the bonds a BBB- rating and expect to have a yield of 5.25% (compared to Treasurys at 0.7%). That makes it enticing for investors but expensive for the borrowers.
And, as another story in the WSJ notes, rating agencies continue to be skeptical of unorthodox deals:
Fitch Ratings analysts say they are unlikely to grant high credit ratings to a first wave of Wall Street deals backed by rental payments on single-family homes, citing the lack of data on how often tenants pay their rent on time.
Still, intangible-backed securities could be making some headway in the market as investors look for higher returns. But remember, these deals are based on the royalty stream associated with the intangible. As we noted in our earlier reports (Intangible Asset Monetization: The Promise and the Reality and Maximizing Intellectual Property and Intangible Assets: Case Studies in Intangible Asset Finance), the evolution of robust capital markets that both utilize and support intangibles has been slow. The Sesac deal builds on the previous wave of monetization; it does not appear to break new ground.
2012-08-08 10:32:41
Source: http://www.athenaalliance.org/weblog/archives/2012/08/return-of-intangible-securitization.html
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