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Monday, 11 December 2017

David Bowie: Starman of structured finance

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David Bowie was not just a giant in the music and fashion businesses. He made a significant contribution to the bond market, in particular structured finance, by pioneering intellectual property securitisation – via so-called Bowie Bonds.

The bonds – actually called Bowie Assisted Living bonds – were downgraded by Moody’s (from an initial A3) during their life, but they made good money for investors. They were called at 100 in January 2004 having paid holders a coupon of 7.9% since launch in 1997.

David Pullman, then head of all structured debt for arranger Fahnestock & Co, was the banker most responsible for the deal.

IFR said at the time:

According to ABS market folklore, Bowie and his RZO business manager Bill Zyblat were turned on to the idea of asset securitisation while trapped on a plane to Bermuda chock-full of ABS market players heading for last September’s ABS conference. As the story goes, a chat ensued on the nature of their business and the suggestion was made to Bowie that almost anything can be securitised - even his future royalty rights.

However, Pullman insisted he had been approached by business associate Zyblat at least two months before Bowie stumbled upon the group of conference attendees on his way to purchase a home in Bermuda. “It’s a bit of a stretch to think I could sell him [the idea] on a plane,” Pullman said.

The deal was also one of those selected as the emblematic transactions of IFR’s first 2000 issues. It might in the end not have been the most influential – music securitisations quickly died a death, as not long later (for the most part) did intellectual property securitisation (although other areas of ABS arguably grew out of both) – but it is certainly one of IFR’s favourites.

Here’s what IFR wrote when the deal was in the works, Ziggy Bonds, IFR 1162, December 7 1996, and when it priced, Stardust securitisation sealed, IFR 1169, February 8 1997.

Sister publication International Securitisation Report spoke to Pullman in January 1999 about the challenges in finding issuers of similar calibre to Bowie to maintain this niche of the market, Spotting star potential.

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