By MyBankTracker  Fri Aug 31, 2012

Mr. Tambourine Man, Sell a Bond to Me: Goldman Sachs Issuing Dylan Royalties Bond

The Financial Times reports that Goldman Sachs has gone back to the drawing board on its plans to issue a bond backed by Bob Dylan’s royalty payments. Here’s the deal:

The $300m bond, known in the market as a non-traditional or “esoteric” asset-backed security (ABS), is being put together by Goldman Sachs on behalf of Sesac, a privately held performing rights organisation based in Nashville, Tennessee.

Sesac holds the rights to music from Mr Dylan, as well as Neil Diamond, the American pop artist, Shirley Caesar, the gospel music singer, and many others.

The deal pools the cash generated from such royalties, securitises it and passes it to investors as a way for Sesac to raise money outside of a bank loan or going to the traditional bond market.

Goldman has had to go back to the table to split the bond into junior and senior tranches, owing, it seems, to ambivalence from investors.

The Bob Dylan bond is hardly the first ABS to be based on a musician’s royalty checks. This was pioneered by a man named David Pullman, who issued ABS based on David Bowie’s royalty earnings — the product came to be known as a “Bowie Bond.” It’s an exotic investment for investors looking to take on a little more risk. It’s also, we must assume, exactly what Bob Dylan would have wanted to happen to his royalty payments.

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