Bowie’s latest hit breaks records

Date: 05/03/1998

By Tim Jones

BONDS: the very word sends most normal people to sleep.

And yet, these instruments provide the trillions of ecu governments need to finance investment and, whatever they say about obeying the 'golden rule' of borrowing, a fair amount of current spending.

Just how useful they can be was shown in February 1997 by singer-songwriter David Bowie and the ingenuity of Wall Street's financial sorcerers.

At 50 years of age, deciding he wanted to cash in some of his future earnings on his 250-song catalogue right now, Bowie issued 50 million ecu in bonds backed up by future royalty payments on his music.

The bonds, with an average ten-year maturity and offering an interest rate of 7.9&percent;, were snapped up by big-time US institutions and received a high-grade rating from Moody's bond-assessment agency.

This was the first so-called 'asset-backed security' supported by intellectual property rather than a tangible asset and it broke new ground in the ingenuity of bond-makers.

A rock star issuing a bond is new, but what was striking was the willingness of risk-averse investors to lend him such a sum at an interest rate only a little higher than that from US government debt.