Rush Royalties Included in $300 Million Bond Offering

I guess you can’t blame bond investors for seeking out sure-fire returns when they get the chance.

Tennessee-based Sesac Inc. is packaging together into a bond issue $300 million in projected royalty earnings by top-flight recording artists like Bob Dylan, Neil Diamond, and Rush.

The security is structured like other, more conventional securities, like mortgage-backed securities, but instead of investors buying into, say, future mortgage payments, they’re buying into the future royalty income of recording artists. That means Sesac and investors are betting on bands like Rush to collect a certain amount of royalty payments in the years ahead. If the royalty payments were to fall short, the bond insurer would have to make up the difference.

I learned about ths deal in today’s Wall Street Journal. The piece doesn’t say if Sesac selected the artists it’s pulling into its security or if these were simply the artists it had the rights to. But based on the company Rush is keeping, with Dylan, Diamond, and jazz singer Cassandra Wilson in the mix, I’m guessing the company wants bankable acts, and Rush is certainly that.

So, the wizards of high finance have discovered Rush. I can’t decide if this is a good thing or a bad thing. It’s probably good for the band, because it means their future royalties have already been secured. If their royalties don’t come in at the level at which they were underwritten, the bond insurer will have to make up the difference. But that’s the insurer’s problem, not Rush’s.

In any case, times are tough in the music business today. It’s so easy to get music for free that recording companies can’t count on album sales even from strong bands like Rush. That opens the door to financial wizardry—and we know where that can lead. But that’s the free market for you. I see this as a vote of confidence in Rush, so let’s rock and roll!—Rob Freedman, Rush Vault

P.S. If you want to invest, go for it. But you need to be sitting on $100 million in investable assets. That rules me out.

 More This and That.

~ by rvkeeper on August 8, 2012.

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