Doug
----
Financial Times, August 4, 1998
MOTOWN WRITERS ISSUE $30M BOND AGAINST ROYALTIES By Alice Rawsthom and Jeremy Grant
.......................................................
Holland Dozier Holland, the veteran songwriters who cowrote scores of classic Motown hits for The Supremes, Marvin Gaye, and The Temptations, have raised $30m by jointly issuing a bond against their future royalties.
Other composers also plan to tap into the burgeoning market for intellectual property-backed investments by staging bond issues, notably Bernie Taupin, the Iyricist who wrote the words for many of Elton John's hits is including "Crocodile Rock", "Daniel", "Rocket Man" and "Candle In The Wind".
The Holland Dozier Holland deal, which was arranged by the Pullman Group, the New York-based finance house, is the second bond issue backed by intellectual property. The first was the "Bowie Bond", whereby David Bowie, the singer, raised $55m against his future royalties in an issue last September.
Rod Stewart, another 1970s star, has since clinched a $15.4m securitised loan from Nomura Capital, which is backed by revenues from his music publishing catalogue. Nomura plans eventually to issue a combined bond against Mr Stewart's future royalties and those of other musicians.
Pullman, Nomura and other financial groups regard intellectual property as a lucrative new sector of the securitisation market. Securitisation involves repackaging assets with predictable cash flow as bonds to be repaid by future earnings.
The Holland Dozier Holland bond consists of a 300-strong catalogue of songs
including "Baby Love", "Where Did Our Love Go?","Please Mr Postman" and "This Old Heart Of Mine". Many of these songs have been steady royalty-earners since the 1960s.
Investors will be repaid from the royalties earned by the songs over 15 years. Royalties are payable each time a song is played by a radio or television station, sold on a recording or featured in a film soundtrack or a television commercial.
Bernie Taupin, one of the few songwriters whose commercial record is as strong as Holland Dozier Holland's, is also understood to be considering raising capital through a bond issue. Several other composers, recording artists and record producers are believed to be considering similar deals.
David Pullman, managing director of the Pullman Group, said musicians and composers were becoming more comfortable with the idea of raising capital in the form of securitised loans as an alternative to negotiating advances from record companies or music publishers.
The successful completionof the Holland Dozier Holland issue suggests investors' appetite for such transactions is still strong. Jeremy Church, an analyst at rating agency Duff & Phelps, said it was becoming "a lot easier" to clinch securitisation deals because investors were more knowledgeable about them.