Ashford & Simpson, a songwriting and performing duo who sold their first batch of songs in the early 1960s for just $75, are expected to announce today they have raised more than $10 million by selling bonds backed by future royalties on their catalog of 250 songs.
Classic songs such as "Ain't No Mountain High Enough," "You're All I Need to Get By" and Diana Ross' "Reach Out and Touch (Somebody's Hand)" made the husband-and-wife duo, Nickolas Ashford and Valerie Simpson, key players in the rise of soul and soul-based rock during the 1960s.
In completing the financing, Ashford, 55, and Simpson, 50, are following in the footsteps of such major celebrities as rock star David Bowie in securitizing their art. Such deals have drawn the moniker "Bowie bonds" since he did one of the first high-profile financings.
By pledging future royalties on record sales and publishing fees, celebrities can get money up front that can be invested or spent, said David Pullman, a former managing director for Fahnestock & Co. who now runs his own firm, the New York-based Pullman Group. Pullman is considered the architect of rock 'n' roll securitization.
Last year, he raised $55 million for Bowie, with bonds backed by the anticipated flow of future royalties from his first 25 albums. In July, Pullman raised a total of $30 million for the Motown writing trio of Edward and Brian Holland and Lamont Dozier, whose many hits include "Stop! In the Name of Love."
Fitch Investors Service, a bond- rating agency, rated the estimated $10 million to $30 million in bonds for Ashford & Simpson as investment grade, with the senior debt getting an A-minus and the subordinated debt getting a triple-B-plus. The deal was rated without any type of bond insurance, because the bonds are expected to have a stable cash flow over a long period.
"This is still a new asset class. It has to prove itself. Still, they are becoming more acceptable, and we're certainly rating more of these," said Wendy Geneen Cohn, director and co-manager of the commercial asset-backed group at Fitch in New York.
The bonds, which have 10-year average maturity, are sold to institutional investors such as insurance companies.
Pullman hopes to expand his strategy of securitizing receivables in the asset-backed securities market into the television and film industry. There are reports that he has been looking at TV syndication royalties for comedian Jerry Seinfeld and the show's co-stars.
He's also working on deals backed by film royalties for films, actors or film libraries.
"It's not for studios, it's for the artists, creators, songwriters, producers and directors. It really empowers them and puts them on equal footing with the studios. That's why they like what we are doing," said Pullman, who added that he is also considering a deal for the literary estate of a major author.
The Ashford & Simpson deal has been in the works for about three months, he said.
"They are past blowing the money," Pullman said. "These guys have been through it all. They want to invest."
The couple met in the early 1960s when Ashford, who was homeless in New York, saw Simpson singing at the White Rock Baptist Church in Harlem. Ashford joined the choir and the two began writing pop songs just for fun. They would later work with such stars as Marvin Gaye and Ross.
Recently the couple founded their own record label, Hopsack & Silk, and launched an Afro-Caribbean restaurant, the Sugar Bar, on Manhattan's Upper West Side.
In 1997, the two released the "Been Found" CD featuring author-poet Maya Angelou.