Bowie Bonds

bowie bonds

Bowie Bonds are asset-backed securities of current and future revenues of the 25 albums (287 songs) that David Bowie recorded before 1990. Issued in 1997, the bonds were bought for US$55 million by the Prudential Insurance Company. The bonds paid an interest rate of 7.9% and had an average life of ten years. Royalties from the 25 albums generated the cash flow that secured the bonds’ interest payments. By forfeiting ten years worth of royalties, David Bowie was able to receive a payment of US$55 million up front. Bowie used this income to buy songs owned by his former manager.

The Bowie Bond issuance was perhaps the first instance of intellectual property rights securitization. The securitization of the collections of other artists, such as James Brown, Ashford & Simpson and the Isley Brothers, later followed. These Bonds are named Pullman Bonds after David Pullman, the banker who pushed the original Bowie deal. In March 2004, Moody’s Investors Service lowered the bonds from an A3 rating (the seventh highest rating) to Baa3, one notch above junk status. This downgrade was prompted by lower-than-expected revenue ‘due to weakness in sales for recorded music.’ A downgrade to an unnamed company that guarantees the issue was also cited as a reason for the downgrade. However, the success of Apple’s iTunes and other legal online music retailers has led to a renewed interest in Bowie and Pullman Bonds.

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