PROLIFIC NOVELISTS
POOLING THEIR ROYALTIES

Asset-Backed Alert
August 2nd, 1999

A few well-known authors are working with Pullman Group in hopes of borrowing against their royalties as part of a deal that would securitize a pool of the various writers' loans.

The transaction, which could end up totaling as much as $50 million, would mark the first securitization of literary royalties paid by publishers.  Pullman Group, a New York boutique investment bank that specializes in securitizing intellectual property, hopes to bring the deal to market by yearend.  Moody's and Duff are expected to assign single-A ratings to the issue.

The identity of the authors has not been disclosed, but they've been described as recognized novelists, each of whom has produced a string of popular titles.  Their works have been generating steady cash flows for a long time, according to a person familiar with the deal.

In a recent report on securitizing intellectual-property rights, Moody's said book-publishing deals will be modeled after recent music-royalty securitizations, since both are subject to the same copyright laws.  However, the music business, relative to the book business, tends to generate greater cash flows and more titles that are suitable for securitization.

Works of multiple authors must be pooled in order for securitization to achieve economies of scale, said Jay Eisbruck, a Moody's vice president who specializes in intellectual property.