REBEL REBEL

Rocking the Bond Market

By PHIL LEGGIERE

It's hard to imagine two worlds farther apart than rock 'n' roll and the bond market.  One is youthful, wild and unpredictable; the other is dry, cautious and mind-numbingly technical.  For David Pullman, however, the 36-year-old financier who last year electrified both the investment world and the entertainment industry with his "Bowie bonds" --- securities based on rock star David Bowie's future royalties --- the two make a winning pair.  "Bonds are about packaging streams of future revenue," he says, "and that's just what the royalties from classic pop songs, provide.  It's really pretty obvious.  I'm surprised no on thought of it before."

Shaking up the status quo has been a way of life --- and good business ---- for Pullman since he first entered the bond market, back in the mid-80s.  Just out of business school, he quickly  became one of the Young Turks transforming the hidebound industry through a new species called asset-backed securities.   (Asset-backed securities are bonds secured against the future income generated from things like bundled credit-card payments, auto loans, and home-equity loans --- essentially, rights to long-term future cash flow.)  As an early master of so-called exotic options (asset-backed securities bundling expected revenue streams from untraditional sources), Pullman established himself as a market leader, first at the Gruntal investment house and later at Fahnestock and Co., a venerated 116-year-old firm.

All this was merely a prelude, though, to the revelation he experienced one day a few years ago when he was taking with William Zysblat, a business associate from the business management firm RZO --- and David Bowie's business manager.  "William stopped by to say that he was looking to find a purchaser for Bowie's song catalog," recalls Pullman.

When Zysblat told him that Bowie owned the publishing rights to his songs, Pullman realized that the rocker's future royalties could make the perfect asset-backed security.  So, instead of selling the rights to his work, Bowie would get cash by selling a piece of his future earnings.  The musical and financial innovators had an immediate meetings of minds.  As Pullman describes it, "Bowie jumped on the idea.  His response was, "Well, why don't you get started?""

Needless to say, many at Fahnestock were shocked at the notion of selling the creator of Ziggy Stardust to their august and stodgy roster of pension-fund, banking and insurance-company investors.  "They said, "You must be crazy, David; this will never work,'" he recalls with a laugh.  "That changed quickly when Moody's gave Bowie bonds an A3 rating."

Pullman's gutsy bet yielded Bowie a reported $55 million tax free (money from asset-backed-bond offerings is considered a loan against future income) without making him give up control of his intellectual property.  It also gave Pullman, who'd never been completely comfortable in a corporate setting, a chance to run his own show as managing director of the Pullman Group.  His next move?  Several high-profile securitizations.  Pullman says that possible new bonds are in the works for the lyrics of Elton John collaborator Bernie Taupin as well as the royalties of Paul Simon, the Rolling Stones and Crosby, Stills, Nash and Young.  In addition to rock, Pullman suggests, film libraries, literary estates, and television-syndication rights are prime targets for his new company.

Where does Pullman go from here?  Though the bonds have so far been restricted to large institutional investors, he hoes to make available to a wider market in the future.  For existing bondholders "it's been a win-win," he says.   "The stock market may go up and down, but people will keep listening to the music either way."

SUCCESS, December 1998.