With the value of intangible assets increasing on the balance sheets the US companies are raising finance by using Intellectual Property (IP) assets. With the evolution of new business models across industries and companies, the intrinsic value of companies has undergone a remarkable transformation in the past two decades. In other words, the intangible assetspatents, trademarks and copyrightsare increasingly becoming the value drivers for a company.
However,
increasingly more companies are using intangibles to borrow
from banks. Though many firms have raised finance against
IP assets such as trademarks and patents, the biggest IP securitization
till date is that by Dunkin' Brands, a US-based snack-bar
chain. The company raised $1.7 bn by selling bonds backed
by royalties it will receive in the future from its franchises.
Jordan Yarett, Partner, Paul Weiss, says that the efficiency
of securitization markets and the ability to garner credit
ratings on debt are driving factors behind the growing trend
of raising finance using IP assets. Finally, the securitization
industry is changing its direction with borrowing against
future revenues generated by intellectual property deals.
For
almost a decade now, IP financing has been experiencing sporadic
success. Though IP assets were used in securitization deals
that took place earlier, they failed to live up to their potential
for securitization. The major factor for the limited success
is because of the complexities involved in using IP assets
as collateral, than traditional assets classes. Lack of awareness
on IP securitization among owners and investors, availability
of other alternatives for securitization have acted as roadblocks
for effective IP securitization. Also, the patent and trademark
disputes that took place in the last decade have made investors
think twice before investing in IP assets.
IP
securitizations deals are different from standard securitization
of future revenues, such as bonds backed by a mortgage loan
or a car loan. IP securitization is a means of raising capital
by transferring existing and future receivables backed by
IP assets to a special purpose vehicle (SPV) which then issues
bonds to repay the originator. The use of an SPV is designed
to insulate the assets from other creditors of the seller
in the event of the seller becoming bankrupt. |
