Thursday, January 15, 2009

Blame It All on Bowie Bonds?

There are some interesting stories being published blaming the current financial meltdown on - get this - David Bowie and his “Bowie Bonds” from about ten years ago. Here's The Guardian and here's the Rolling Stone and here's the Mirror story on which the others are based.

These bonds were an example of the “securitisation” of IP - whereby investors get income based upon a reliable royalty stream and the IP holder gets cash up front. The financier who takes credit for the Bowie Bond type of transaction is David Pullman of the Pullman Group in NYC. The original Bowie Bond issue generated about $55 million in 1997.

Transpose this idea of revenue generating asset (copyright) based bonds and magnify by several orders of magnitude to the mortgage backed securities that have fueled the current meltdown. That’s the gist of these articles.

Of course, it's silly to blame the current meltdown on the Bowie transaction. But the transaction was an important milestone in the road to the use of asset based securities. In fact, the use of IP in a much simpler way as collateral security is something that is also very important and could be used to convince nervous lenders to give credit these days to a wide range of companies that need financing - NOW.

Nortel , which has just filed for bankruptcy protection and has an extraordinary portfolio of IP, might want to think about this, if it hasn't yet done so.

In fact, I have done a lot of work for the late lamented Law Commission of Canada as their advisor on security interests in intellectual property, which resulted in a book on the subject which I edited and to which many including myself substantially contributed. The book, which is international in scope, is still available here.


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