In 1997, David Bowie turned ten years of his into bonds. The structure he used now moves billions.
The last financing episode covered the bilateral version: one lender, one borrower, a charge over the royalty stream, and the rights staying exactly where they were. Securitisation is the capital-markets version of the same idea, with one structural reversal at its heart: this time the rights do move.
The mechanics in one paragraph. The catalogue owner raising the money (the originator) sells a defined pool of royalty assets outright to a new company created for the purpose, a special purpose vehicle (SPV). The SPV pays for the assets by issuing notes, tradable debt, to investors, and hands the proceeds to the originator. A servicer collects and administers the royalty income, which flows through the SPV to repay the noteholders in a strict order. Whatever is left after the notes are served, the residual, belongs to the originator. Once the notes repay in full, the economics of the catalogue come home.
The famous first example is the Bowie bonds: a reported $55m raised in 1997 against ten years of Bowie's US royalty income, at a reported coupon of 7.9%, reportedly taken up in full by a single insurance investor. The deal was private and the catalogue eventually returned to Bowie, but it proved the point: royalty income is regular and forecastable enough to behave like debt service. The modern wave is much bigger. Catalogue funds now use the same structure at nine-figure scale, refinancing their bank borrowings with rated asset-backed securities (ABS) sold to insurers and asset managers.
Advisers meet this structure from every side: the client who sold in and lives on the residual, the fund analyst pricing a tranche of the notes, the lawyer asked whether the sale would survive an insolvency. This episode covers what each of them needs to see.