Typical bonds are repaid from revenues generated by a company in the
form of sales or from a government in the form of taxes. Securitized
bonds are different because they "...are repaid from the cash flow
generated by specific pool of assets. An originator sells its assets
to a trust or corporation, which then issues securities backed by
these assets. The securities are usually obligations that have been
issued by the special purpose entities (SPE's). In a traditional
securitization, investors do not usually have recourse to the seller
of the assets, only to the assets contained within the trust." In
contrast, corporate bonds usually allow buyers to seize assets of the
corporation in the event the bonds cannot be paid, even becoming its
owners. Securitized bonds allow what would otherwise be an illiquid
asset to be made liquid for its owner.
"Global Securitization"
http://www.businessweek.com/adsections/global/global_index.htm
The Bowie Bonds, funded by projected earnings on his back catalogue,
or floated at $55 million with a triple-A rating by Moody's. The
rating agency projected a 7.9% annual return, and the issue was
purchased by Potential Insurance. Mr. Bowie was the first pop star to
issue bonds.
"Bowie Bonds" By Mark Steyn, Slate (May 8, 1997) http://slate.msn.com/id/2894/
"Who's Who in Bowie Bonds" by Roy Davies (December 21, 2004)
This web page provides extensive details on the David Bowie
transaction and how other artists and types of intellectual property
have followed in his footsteps.
"In January 1997 he made financial history by raising $55 million
through the issue of issue of 10-year asset-backed bonds, the
collateral consisting of future royalties from 25 albums that he
recorded before 1990. Prudential Insurance Co. bought the bonds."
"Bowie Bonds Under Review" Edited By Jonathan Cohen, Billboard.com (May 28, 2003)
"Moody's Investors Service says it may downgrade about $55 million of
bonds backed by music royalties of rock icon David Bowie in light of
the sales slump in the recording industry."
"'The rating review was prompted by lower than expected revenues
generated by the assets due to weakness in sales for recorded music as
well as the recent downgrade of an entity that provides credit support
to the transaction,' the bond rating agency said last week. "
"Bowie Bonds" Pullman http://www.pullmanco.com/dbb.htm
This web site, by the company founded by the lawyer who structured the
deal, provides a comprehensive list of links to articles describing
the transaction.
I hope these resources are of assistance to you.
Sincerely,
Wonko
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