Bank to Offer Music Securities

Prudential Securities on Monday announced a joint venture with music entrepreneur Charles A. Koppelman to turn songs, books and movies into securities.

Koppelman’s new boutique investment bank, CAK Universal Credit Corp., will draw on a $200-million credit line from Prudential to make loans to musicians and other owners of intellectual property, backed by the royalties from their creations.

The loans will be bundled into asset-backed securities, which Prudential then will sell to institutional investors. Asset-backed securities are commonly secured by the revenue from industrial-equipment leases and real estate but are relatively rare in the intellectual property area.

The market got its start about a year ago when British rocker David Bowie raised $55 million in a bond offering secured by royalties from his three-decade recording career.

Koppelman, former head of EMI Music Publishing Worldwide, said he expects to make his first loans within six weeks. The first private placement of securities from those loans probably will follow in five or six months, he said in an interview Monday.

The advantage for the musician or author is the ability to get immediate cash--up to 75% or 80% of the value of the income stream from their songs or books--without actually selling the rights. When the securities mature, typically in 10 to 15 years, the rights revert to the artist.

So far, the exotic investments have been marketed mainly to institutions, and some observers think it ought to stay that way.

“At some point, somebody’s going to decide that there are a lot of suckers out there who want to own a piece of John Grisham or their favorite movie star,” said Richard Lehmann, president of the Bond Investors Assn., an investor group in Lake Miami, Fla.