What Is a Bowie Bond
A Bowie bond was once a unique type of asset-backed protection which used as collateral the royalty streams from provide (at the time) and long run album product sales and reside performances by means of musician David Bowie.
Bowie bonds are also every so often known as “Pullman bonds” after David Pullman, the banker who created and purchased the principle Bowie bonds.
Key Takeaways
- Bowie bonds were one of those bond backed by means of recording artist David Bowie’s royalty streams, and marked the principle such protection backed by means of a performer’s cash glide potential.
- Bowie used the $55 million raised from the issuance to buy rights to his tune from his former manager, which may then in turn generate further royalties to bondholders.
- The banker credited with making this happen, David Pullman, has since issued an similar securities from other appearing artists.
- While an enchanting idea, this kind of artist-backed debt tool has out of place appeal with the rise of online streaming and file sharing.
Figuring out Bowie Bonds
Bowie bonds were first issued in 1997 when David Bowie partnered with Prudential Insurance policy Company and raised $55 million by means of promising investors income generated by means of his once more catalog of 25 albums. The 25 albums, which were used since the underlying belongings for Bowie bonds, were recorded prior to 1990 and included classics similar to The Man Who Introduced The World, Ziggy Stardust, and Heroes. David Bowie used the proceeds from the bond sale to shop for old-fashioned recordings of his tune owned by means of his former manager. His rights to royalties from wholesale product sales inside the U.S. were securitized into bonds. In have an effect on, by means of growing the bonds, he finally forfeited royalties for the life of the bond.
Bowie bonds are first inside the line of Pullman bonds, which can be a securitization of the selection of intellectual property rights of musical artists. Following the nice fortune of Bowie bonds, David Pullman went immediately to create an similar bonds at the long run income transfer of artists similar to James Brown, Ashford & Simpson, the Isley Brothers, and the Holland-Dozier-Holland publishing catalogs.
Advantages and Disadvantages of Bowie Bonds
Bowie bonds, when issued, had a face value of $1,000 with an interest rate of 7.9% and a maturity of 10 years. That they had been moreover self-liquidating bonds, that is, the principle declined each and every three hundred and sixty five days. Bowie bonds represented some of the important first circumstances of a bond that used intellectual property since the underlying collateral. The bonds were fascinating to investors on account of they offered what was once at the time noticed as a gradual long term investment. Moreover, the bonds were purchased by means of investors who seized the danger to own a piece of a favorite rock giant title. In addition to, top credit score status firms, similar to Moody’s Buyers Supplier, gave the bonds an investment-grade ranking, indicating that Bowie bonds were subject to a low probability of default.
The cost of the bonds began to mention no as online tune and file sharing grew in popularity, reducing album product sales. At the crack of crack of dawn of the 21st century, the tune industry abruptly found out itself in crisis as product sales slumped. Bowie bondholders spotted their investments tank as tune enthusiasts drifted transparent of dossier shops to online file-sharing platforms. This resulted in a downgrade by means of Moody’s in 2004, reducing the bonds from an A3 ranking to Baa3, one notch above junk status. Alternatively, the semblance of criminal online tune retail outlets renewed interest in the ones securities inside the latter part of the decade. The Bowie bonds matured and were redeemed in 2007 as to start with planned, without default, and the rights to the income from the songs reverted to Bowie.
