Motown Gets It On R&B-catalog bonds selling to tune of $30M

By RICHARD WILNER

         A legendary Motown songwriting trio is ready for a record payday. The magical Holland/Dozier/Holland team is about to sell $30 million in bonds backed by the royalty stream from their catalog of songs, which includes some of the best-selling tunes in contemporary music.
         The Edward and Brian Holland and Lamont Dozier song book includes the Supremes’ “Baby Love,” “I Hear A Symphony” and “Stop In The Name Of Love,” the Four Tops’ “Baby I Need Your Loving,” “Standing In The Shadows Of Love” and “It’s The Same Old Song,” as well as the best-selling songs from the Temptations, Marvin Gaye and Martha & the Vandellas.
         By floating the so-called Bowie bonds, the songwriting team becomes just the second entertainment group to cash in on asset-backed securities based on future royalties.

        Rocker David Bowie last year started the trend when he floated $55 million in royalty-backed bonds. By doing so, Bowie is able to cash a check for $55 million today while royalties from a steady stream of record sales is directed to a specially set up fund which will pay off the bond holders. The key to the Bowie deal was that the artist owned all the rights to his songbook.
         Like Bowie, Holland/Dozier/Holland will not have to wait a decade or so to collect on the royalties.  They each take home roughly $10 million. The income stream represents just the songwriting share of the royalties. The trio does not own the publishing rights to the tunes. The total value of the catalog is about $100 million.
         As with the Bowie bonds the Motown deal was put together by Fahnestock & Co.’s David Pullman, who is the pioneering force in the small niche of the $150 billion asset-backed market.
 Most bonds are backed by more tangible assets like car loans, mortgages and credit card receivables.
         That bonds could be backed by intellectual property is a new wrinkle in the business.
         Unlike the Bowie bonds, the public might someday be able to get its hands on Pullman’s Motown effort.  The Motown bonds are expected to get an “A” rating from bond-rating agencies.
         It is believed that Fahnestock will purchase the $30 million in bonds backed by the Motown songs for possible resale down the line. Prudential Insurance bought the entire Bowie-bond package,
         Pullman has spent the past several years working on formulas for royalty-backed bonds. All that is needed he said, is the steady sale of a large catalog of work, be it songs, books, patents, or TV syndication rights. Creators like Aaron Spelling, Stephen King, Crosby, Stills and Nash and the Rolling Stones, for example, fit the bill. In addition to providing the creators with a mega-payday, the bond also allows them to keep possession of the rights to the songs.
         Pullman, who works out of the company’s New York office, under the newly-created Pullman Structured Asset Sales Group, also hired Billy Meshel, a West Coast industry veteran, to help smoke out future deals. Meshel is the former head of All Nations Music, which he recently sold to MCA Music Publishing.

NEW YORK POST April 9, 1998 – Page 28