David Bowie’s contribution to securitisation

David Bowie

David Bowie was a genius musician and it’s understandable that many tributes following his passing overlook his contribution to law.

In 1997 he invented the ‘celebrity bond’ – popularly known at the time as the ‘Bowie Bond’. It was the early days of securitisation, and the bonds allowed Bowie to sell the rights to his future royalties.

He raised £35m straight away, forfeiting his royalties for the next ten years.

The success of Bowie Bonds was not to last, however. In 2004, Moody’s downgraded them to one notch above junk status “due to weakness in sales for recorded music.”

By 2009, journalist Evan Davis was asking, ‘Is David Bowie to blame for the credit crunch?

“There was a period of time before the financial crisis when securitisation was a fashionable area for esoteric financing,” says Clifford Chance partner Kevin Ingram. “The Bowie Bonds were a kind of hybrid form of secured finance and were high profile, being very much a sign of the excitement of the securitisation market at the time.”

“But the popularity of different types of financing goes in cycles and during the financial crisis there were well documented concerns about securitisation not least esoterics and issuance dropped.

“To bring things up to date, the securitisation market has been re-establishing itself, first through a focus on core products such as residential mortgages and auto loans but now people are looking again at securitisation as an alternative way of financing a range of assets including aspects of intellectual property, such as patents.”