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Downgrade for Debt Backed by Rock Star

March 23, 2004|From Bloomberg News

Debt backed by royalties of British recording artist David Bowie was cut three levels by Moody's Investors Service because of a drop in music industry sales.

The rating on $55 mil- lion in debt by Jones/Tintoretto Entertainment Co., which issued the bonds, was reduced to Baa3 from A3. The reduction completes a review begun in May, New York-based Moody's said in a research note last week.

The review was prompted by lower-than-expected revenue generated by the assets backing the issue, first sold in February 1997. A rating cut of EMI Group was a second factor, Moody's has said. EMI Group, which provides credit for the security, was cut to Ba1, or junk status, from Baa2 on March 11, 2003.

Entertainers such as Rod Stewart and heavy-metal band Iron Maiden have sold securities backed by royalties from their work to raise money without selling off the works completely. Selling asset-based debt also allows artists to collect funds without waiting years for royalty payments.

The music industry, hurt by piracy and competition, is facing a fifth year of recession. Vivendi Universal's Universal Music Group has cut 1,500 jobs in the last two years and reduced marketing spending to save money.

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