Fashion Designer BCBG Max Azria Picks Up $53 Million; Bond Collateralizes Intellectual Property and Trademarks

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Intellectual Property continues to become more fashionable. TodayÂ?s $53 million bond issuance by New York Life Investment Management, collateralized by intellectual property assets of wildly popular BCBG Max Azria Group, a trend started by David BowieÂ?s Â?Bowie BondsÂ? continues. BCBGÂ?s IP assets include such popular trademarks as BCBG Max Azria, BCBGirls, BCBG Attitude, Parallel, To The Max, and Herve Leger.

California-based BCBG Max Azria Group (http://www.bcbg.com), a leading designer, manufacturer and retailer of apparel, footwear and accessories, has just received $53 million as its part of an asset-backed note issued by New York Life Investment Management LLC (NYLIM). The deal collateralizes BCBG’s intellectual property assets, including such popular trademarks as BCBG Max Azria, BCBGirls, BCBG//Attitude, Parallel, To The Max, and Herve Leger.

In 1989, fashion designer Max Azria launched BCBG, today one of the hottest names in the fashion industry, to deliver a new line of clothing and accessories for women who wanted to look beautiful who wanted to look beautiful without having to spend a lot of time at it. BCBG stands for bon chic bon genre, Parisian slang for “good style, good attitude”.

Collateralizing intangible assets is challenging, and poses risks not typically associated with collateralizing physical assets. For instance, an investor that may collateralize the trademarks and licensing royalties associated with a popular drug supplied to a pharmaceutical company may come up short if the drug company is later forced by the Food and Drug Administration to withdraw the drug brand from the market. Determining the appropriate value of the intellectual property further compounds the financial due diligence.

To help with the financial analysis of the intellectual property collateral for the bond, New York Life Insurance Company called on the investment management expertise of IP Innovations Financial Services, Inc. (http://www.ipinn.com). Charlotte, NC-based IPI is a leading provider of credit enhancements for intellectual property.

IPI’s credit enhancement, which supported the IP-backed note issuance, features a conservative loan-to-value ratio. The total transaction is $53 million, $12 million of which is supported by IPI’s credit enhancement.

According to Edward Fitzgerald, Managing Director, NYLIM (http://www.nylim.com), “IPI’s participation allowed us to increase the size of our clients’ investment in the transaction, while meeting the issuer’s objectives. The credit enhancement provided by IPI allowed us to synthetically syndicate a portion of the credit risk in a cost-efficient manner.”

BCBG Max Azria, which opened its first BCBG Max Azria boutique in Moscow, Russia this past October, is pursuing an aggressive worldwide expansion strategy. With access to new expansion capital, Mad Max is set to help even more women look beautiful. Today, celebrities such as Julia Roberts, Halle Berry, Charlize Theron, and Mischa Barton wear the BCBG brand.

BCBG’s note collateralizing intellectual property is not a new phenomenon. In 1997, British rock star David Bowie set the stage for collateralizing intangible assets when he picked up $55 million by selling “Bowie Bonds”.

In Bowie’s case, the bonds were backed by future royalties on the publishing rights and master recordings of a number of Bowie's tunes, including hits such as Let's Dance and Changes. By selling the bonds, Bowie gets ready cash, rather than waiting for future royalties.

Since the Bowie Bonds, rhythm & blues artists Ashford & Simpson, the Motown songwriting team of Edward Holland, Lamont Dozier and Brian Holland, and the "Godfather of Soul," James Brown have also sold similar bonds.

With intangible assets comprising more than 70% of the market value of the Fortune 500, expect to see more intellectual property collateralized bonds emerge as a popular funding mechanism to access cash for corporate operations and expansion.

It could become … Fashionable!

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Andy Gibbs