DAVID PULLMAN: A MAN ON A MISSION

Is this controversial financier and creator of the much-ballyhooed "Bowie Bonds"
a Wall Street genius or merely a tireless huckster?  Only time will tell.

By Bernard Baur

David Pullman likes to think of himself as a pioneer, a hardy soul who forged a new path, staked out his claim, and is more than ready to defend it against all comers.  The only difference is that Pullman's homestead is on Wall Street and his stock in trade is high finance.  Likely to remind more people of Gordon Gekko than Kit Carson, Pullman pulls no punches as he surveys his territory.

The Managing Director the Pullman Group, the man in question is awfully excited about the future.  He talks so fast he's barely intelligible at times, rattling off so many plans for so many deals that he can hardly constrain himself.  Pullman, of course, is the self-declared creator of "Bowie Bonds," the financial vehicle that brought rock & roll to Wall Street (and some $55 million to rock star David Bowie).

It seems yesterday, although it's actually been quite a while since the press heralded this particular transaction as an exhilarating new development that would add some glitter to the staid and conservative environment that is investment banking.

And, for the past two years, distinguished publications in the areas of finance and entertainment, as well as every newspaper in the world, have run stories about this financial innovation, with all the zeal of a paparazzi spotting Monica Lewinsky outside the Watergate.

Further fanning the flames of publicity, Pullman, himself, always talked of bigger and better deals on the horizon that would benefit many more artists, while giving investors a taste of glamour and stardom.  Of course, such proclamations are made with all the subtlety of P.T. Barnum, which only brought more detractors his way.

Today, after months of hype, the awesome paydays originally anticipated by Pullman have not exactly come to pass.  "It certainly wasn't for want of trying," he insists.  "These deals have nine lives, and everywhere you turn, there's a deal killer that delays the process."

The foundation of what Wall Street insiders now call "Pullman Bonds" is nothing new.  Simply put, they're asset-backed securities.  It's a well-known and simple process that's been utilized in real estate business for years, with lenders bundling mortgages together and using them as securities to issue bonds.  The concept was later expanded to include other assets with a predictable cash flow.

But what David Pullman did differently was to change the asset to something a lot more innovative and exciting: song royalties.  And the fact that the first deal he put together involved a flamboyant rock star named Bowie ensured that the media would take notice and report rumors that other artists were piled on the platform waiting to jump on that Pullman money train.

Lee Phillips, senior partner at Manatt, Phelps & Phillips, attorneys for Nomura Securities, Pullman's chief competitor in celebrity bonds until they recently bowed out of the race, looks at the whole scene with a bit more circumspection.  "The excitement over the Bowie Bond deal was to some extent overblown by the media," he says.  "It attracted a lot of attention and some lookers, but it certainly didn't take off like the shot it was supposed to."

The main reason for the lack for action, according to Phillips, is that although there may be a significant pool of recording stars and songwriters whose song catalogs qualify as an asset security, there just aren't that many willing to take the plunge.  "Any artist with a steady stream of income in a particular area would be a potential source," Phillips maintains, "but Nomura went to all sorts of songwriters, recording artists, and other creative people only to be asked, 'Why should I do this?"

The answer of course is cash, in one heft lump sum.  Indeed, when Bowie struck his deal it was reported that he needed the money to buy out a former manager; and additionally, he was in the unique position of having clear title to his entire song catalog, unlike many other artists who typically share or sell of portions of their copyrights during the span of their career.

The particular scenario required for a successful bond venture is one of the problems Pullman has encountered in his quest for the ultimate deal.  Nevertheless, he has managed to pull together two more song-writer bond agreements in the last two years.  His second major score was a $30 million royalty bond with the legendary hit Motown songwriting team of Holland-Dozier-Holland, secured with over 300 of their musical compositions, including such hits as "Stop, In The Name Of Love," You Keep Me Hangin' On" and "Baby Love."

Pullman's latest success, consummated late last year, was a $25 million royalty bond secured by 250 compositions from the husband-and-wife team of Nickolas Ashford and Valerie Simpson, famous for such classics as "Ain't Nothing Like the Real Thins," and "Ain't No Mountain High Enough."

However, critics of royalty-based securities claim that they've never been stress-tested over time, and are potentially subject to the fickle tastes of the general public, not exactly the stability often looked for in investment opportunities.  And the worst case scenario involves an economic downturn that could cause the artist their copyrights forever if their royalty income does not maintain a minimum cash flow.

And that may be a distinct possibility, they say, because, according to the terms of royalty bond deals, investors are guaranteed a certain percentage on their investments over a specific period of time; usually, seven to eight percent over a ten-year period.  So if the royalty cash flow ever becomes depressed, the artist/writer would be in default and subject to forfeiture of their copyrights.

As for Pullman, he simply believes that the criticism directed his way is merely professional jealousy.  "I'm the only one who has ever done a bond deal based on future royalties.  All the others have been loans, not bonds," he asserts.  "A lot of them have tried to copy it, but no one's been able to do it."

While that may be true for the moment, some have come awfully close and others are breathing down his neck.  Last year, for example, not only was Nomura closing in on Pullman's territory, but veteran music industry exec Charles Koppelman teamed with Prudential Securities to create a new company, CAK, to handle music publishing and to securitize any intellectual property that has a solid income.

But in his continuing quest to further distance himself from any future competition, Pullman says he's going to explore other areas of entertainment for possible bond deals, including creative people in film, television, new technology and pharmaceuticals.  "No one's going to be able to keep up with me and do the kind of deals that I do," he states categorically.  "I'm the only one who can do it and everyone's coming to me."

Pullman's master plan also includes keeping everything secret so that no one outside of the principals knows how he designs his transactions.  "All of my bond deals are private placements, so no one will ever see the documentation.  We have spent seven figures on developing our strategies and I plan to keep it private.  People will try, but there will be no true copycat deals," he declares.  "I will never let my competitors see what I do."

With all his plans for the future, his macho bluster, and a pretty decent track record to back it up, you can't help but wonder why David Pullman expresses such paranoia about a little competition.  Perhaps the answer is as simple as this statement from Lee Phillips: "I know for David it's all about secrecy and proprietary, and he's very good at what he does.  But, really, it's not a new process or concept of any kind, and the details are fairly easy to figure out.  I just think that he's a relatively young, intelligent and aggressive guy who may worry a bit more than is reasonably necessary."

Pullman's last words: "The fun is really in doing the deal."

LA VISION, March 1999, p. 22-23