Bowie Bond

DEFINITION of 'Bowie Bond'

An asset-backed security which uses the current and future revenue from albums recorded by musician David Bowie as collateral. The 25 albums a Bowie bond uses as their underlying assets were recorded prior to 1990. David Bowie used the proceeds from the bond sale to purchase old recordings of his music. In creating the bonds, he ultimately forfeited royalties for the life of the bond (10 years).

Bowie bonds are also known as "Pullman bonds" after David Pullman, the banker who created and sold the first Bowie bonds.

BREAKING DOWN 'Bowie Bond'

Bowie bonds, issued in 1997, had an interest rate of 7.9% and a life of 10 years. The Bowie bonds were purchased by Prudential Insurance for $55 million.

Bowie bonds represented one of the first instances of a bond that used intellectual property as the underlying collateral. The value of the bonds began to decline as online music and file sharing grew in popularity, decreasing album sales. This resulted in a downgrade by Moody's in 2004. However, the advent of legal online music retailers renewed interest in these securities in the latter part of the decade.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Secured Bond

    A type of bond that is secured by the issuer's pledge of a specific ...
  3. Continuous Bond

    A financial guarantee commonly used in international trade that ...
  4. Bond Option

    An option contract in which the underlying asset is a bond. Other ...
  5. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  6. Bond Resolution

    1. A document used with government bonds, especially general ...
Related Articles
  1. Markets

    Ground Control to Bowie Bonds

    Was David Bowie an alien? How else would you explain his prescient move to float bonds in 1997, securitizing his album sales so he could buy back rights to his old songs?
  2. Managing Wealth

    David Bowie: The Man's Marketability Goes On And On

    Sales of all Bowie's albums surged after his death. The reason? Death revives a music/art icon's brand, while increasing the value of that icon's work.
  3. Investing

    Peabody Chapter 11: Is This Only the Beginning?

    Gain insight into why Peabody Energy ended up in bankruptcy after the coal mine sale to Bowie failed, and discover if Peabody’s bankruptcy marks the beginning of a sector-wide trend.
  4. Markets

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
  5. Personal Finance

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  6. Managing Wealth

    The Basics Of Bonds

    Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
  7. Trading

    Top 6 Uses For Bonds

    We break down the stodgy stereotype to see what these investments can do for you.
  8. Markets

    5 Fixed Income Plays After the Fed Rate Increase

    Learn about various ways that you can adjust a fixed income investment portfolio to mitigate the potential negative effect of rising interest rates.
  9. ETFs & Mutual Funds

    The 4 Biggest Bond Myths

    Bonds can be a great addition to a portfolio but be aware of these four myths.
  10. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
RELATED FAQS
  1. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  2. How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
  3. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ... Read Answer >>
  4. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ... Read Answer >>
  5. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
  6. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center