Goldman Sachs tries again with performance-right ABS
One way to higher yields is to invest in ABS linked to the royalties generated by the music of Bob Dylan, Neil Diamond and a host of lesser stars.
But investors have recently grown skeptical. Goldman Sachs has tried to market such an ABS twice before and both times received a chilly response. It is hoping the third time proves to be the charm. It will try again in September to interest clients in a $300 million deal for Sesac, the Nashville concern that holds rights to the music.
Bloomberg Businessweek summarizes the views of one S&P analyst: "Royalty payments connected to performances rights for copyrighted music have shown to be 'relatively insulated from economic downturns. ' Still, the company doesn't have an exclusive right to license public performances for its affiliates, and the seasonal changes in royalty receipts may lead to volatile income for the bond payments."
It's unclear why Goldman Sachs pulled the plug on the deal twice before, but it has made some changes. It will now market two tranches, a junior tranche and a senior tranche. The yields on the lower-rated deal will likely top 5 percent, which is astronomical, but appropriate for a BBB- grade security, which would put it barely above junk status.
The FT says that, "If the prospects darken they (Goldman Sachs bankers) have plenty of options for Dylan songs to use as soundtrack for any roadshow -- Most Likely You Go Your Way and I'll Go Mine from 1966, for example, or the more recent When The Deal Goes Down. If it falls apart entirely and bankers are denied the hunks of plastic they use to celebrate deals, they may suffer from the Tombstone Blues."