Intellectual Property Securitization

Funding corporates with high expenditures for reseach and development and an asset side that is hence characterized by a high portion of intangible assets is one of the most challenging disciplines in corporate finance. Due to the still existing lack of pragmatic and sophisticated evaluation methods for intellectual property, these corporates' dependence on bank lending does not seem to end in the nearer term. Starting with the Bowie Bonds in 1997, securitization of intellectual property as a potential funding alternative appeared on the scene. Capital market investors now have the opportunity to diversify their portfolios with unique investments such as royalties from sales of an AIDS drug, revenues from James Brown's music or even the success of the latest Hollywood blockbusters. Ten years after the first transaction was closed, today most of these corporates still depend on bank lending. Based on an introduction of general challenges of corporate funding, the author Alexander C. Kirsch provides a broad overview of the world of intellectual property. Extensive market research and practical examples help to explain benefits and drawbacks of the securitization instrument in that context. To support feasibility of securitization in daily business practice, the author introduces a potential scoring tool for the identification of eligible intellectual property assets and he explains key elements and challenges in the structuring of such a transaction. Due to the topic's novelty, this book is of interest for a broad range of readers, ranging from corporate finance managers over bankers to general economists. The book takes the perspective of a CFO in an intellectual property intense industry and it can hence be used as a comprehensive guideline for the analysis and execution of an intellectual property securitization.