What Is a Bowie Bond
A Bowie bond was a unique type of asset-backed security which utilized as collateral the royalty streams from current (at that point) and future collection sales and live exhibitions by performer David Bowie.
Bowie bonds are additionally now and again known as "Pullman bonds" after David Pullman, the banker who made and sold the main Bowie bonds.
Understanding Bowie Bonds
Bowie bonds were first issued in 1997 when David Bowie partnered with Prudential Insurance Company and raised $55 million by promising investors income generated by his back catalog of 25 collections. The 25 collections, which were utilized as the underlying assets for Bowie bonds, were recorded prior to 1990 and included works of art like The Man Who Sold The World, Ziggy Stardust, and Heroes. David Bowie utilized the proceeds from the bond sale to purchase old recordings of his music owned by his former manager. His rights to royalties from wholesale sales in the U.S. were securitized into bonds. In effect, by making the bonds, he at last forfeited eminences for the life of the bond.
Bowie bonds are first in the line of Pullman bonds, which are a securitization of the assortment of intellectual property rights of melodic artists. Following the progress of Bowie bonds, David Pullman proceeded to make comparative bonds on the future income stream of artists, for example, James Brown, Ashford and Simpson, the Isley Brothers, and the Holland-Dozier-Holland distributing catalogs.
Benefits 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. They were likewise self-liquidating bonds, that is, the principal declined every year. Bowie bonds addressed quite possibly the earliest occurrence of a bond that pre-owned intellectual property a the underlying collateral. The bonds were appealing to investors since they introduced what was at the time seen as a consistent long term investment. Likewise, the bonds were purchased by investors who jumping all over the chance to possess a piece of a most loved demigod. Likewise, top credit rating agencies, for example, Moody's Investors Service, gave the bonds a investment-grade rating, demonstrating that Bowie bonds were subject to a low risk of default.
The value of the bonds started to decline as online music and file sharing filled in ubiquity, decreasing collection sales. At the dawn of the 21st century, the music business out of nowhere found itself in crisis as sales drooped. Bowie bondholders saw their investments tank as music fans floated away from record stores to online file-sharing platforms. This came about in a downgrade by Moody's in 2004, lowering the bonds from an A3 rating to Baa3, one step above junk status. Be that as it may, the approach of legal online music retailers restored interest in these securities in the last option part of the decade. The Bowie bonds matured and were redeemed in 2007 as initially arranged, without default, and the rights to the income from the melodies returned to Bowie.
- Bowie bonds were a type of bond backed by recording artist David Bowie's royalty streams, and denoted the main such security backed by a performer's cash flow potential.
- While an interesting concept, this type of artist-backed debt instrument has lost appeal with the rise of online streaming and file sharing.
- The banker credited with getting this going, David Pullman, has since issued comparable securities from other performing artists.
- Bowie utilized the $55 million raised from the issuance to buy rights to his music from his former manager, which would then thus generate more sovereignties to bondholders.