(Corrects 16th paragraph to show Miramax securitization
involved more than 700 films, not 100)
By Adam Tempkin
NEW YORK, Nov 30 (IFR) - The largest-ever brand-licensing US
so-called whole-business securitization for Iconix Brand Group
closed this week. Barclays led the $600 million transaction, the
first such deal broadly distributed in the 144A market.
Iconix owns 28 high-profile brand trademarks and licenses
them out to strategic partners, including Target and Walmart.
The company is using a portion of the proceeds to pay for
its recent acquisition of the Umbro brand from Nike, which cost
$225 million. That deal also closed this week.
Formed in 2005, Iconix owns brands including
Mossimo, Starter, the "Peanuts" cartoon characters, Joe Boxer,
London Fog, Ed Hardy, Sharper Image, and Zoo York. The brands
are worth US$13bn in retail sales, according to the company.
When Iconix first started out, it had little money and
borrowed against the handful of trademarks it had at the time.
Those first deals were in the range of $20 million.
"But as we built this company, we were taught about whole
business securitizations and we viewed it as an optimal
financing engine for us," Neil Cole, the founder and CEO of
Iconix, told IFR. "It offers us incredible flexibility. A
traditional deal would have all sorts of covenants.
"We can use it as a warehouse facility, and it will continue
to be our growth engine," Cole said. Iconix will be adding a
29th brand to its portfolio of trademarks in the near future.
Whole business, or "operating asset" securitizations are
more complicated than traditional securitizations which only
rely on cashflows from a specific pool of financial assets such
as mortgages or auto loans.
In whole-business deals, which have typically been more
popular in Europe because of its more creditor-friendly laws,
the cashflows of an entire business unit -- including intangible
assets such as cashflows from intellectual property, royalty
income, franchise fees, licenses, and trademarks -- are
Moreover, unlike a traditional asset-backed security, an
operating-asset securitization does not have to sell the assets
securitized to a special purpose vehicle and therefore the
borrower can retain operational control.
Whole business deals make sense for companies that have
assets, such as brand licenses, which cannot be reflected on
balance sheet, and can provide stable and steady income streams.
STRENGTH AND STABILITY
Most whole-business securitizations from the pre-crisis boom
era had Triple A wraps from monoline insurers, such as MBIA and
Ambac. However, now that the monolines no longer offer such
guarantees, recent transactions have carried top ratings in the
Triple B range.
Investors' ongoing quest for yield in a long-term low
interest rate environment has renewed interest in these
non-traditional ABS deals, which often allow companies to attain
more efficient financing relative to corporate bank/bond
Barclays, which absorbed Lehman Brothers' "esoteric ABS"
team when Lehman dissolved in 2008, has been the leader in
structuring these unique deals.
In March, Barclays structured the largest post-crisis
operating-asset securitization for Domino's Pizza. The
$1.675 billion deal, which was a refinancing of a franchise
royalty-fee securitization that it originally issued in 2007,
was the highest-ever rated whole business securitization without
Late last year, the bank also structured the first-ever film
library securitization in the US for Miramax. The collateral for
the $500 million transaction comprised a library of more than
700 films including such titles as Pulp Fiction, Good Will
Hunting, and No Country for Old Men.
Barclays sold the deal to corporate, high-yield, and ABS
And this past October, outdoor advertising company Fairway
Media Group priced a $257 million whole business securitization
backed by billboard revenues. Barclays structured and executed
the deal, enabling Fairway to refinance its entire capital
structure and pay a substantial dividend to shareholders at an
all-in yield of 5.6%.
Only 23 of the brand trademarks owned by Iconix were linked
to the securitization that closed this week.
The offering, Iconix 2012-1, was increased in size from $500
million, had a weighted average life of 5.5-years, and priced
inside guidance of 4.50% at a yield of 4.25%.
The success of the deal "speaks to the strength and
stability of the non-traditional ABS market," said Cory
Wishengrad, the co-head of ABS at Barclays. "The company has a
unique business model, which is perfectly suited for
S&P rated the deal BBB and signed off on a borrowing base of
$1.1 billion. However, only $700 million was issued, including
$600 million in debt and $100 million in variable funding notes.
The balance, $400 million, can be accessed by the company in
the future from a master trust structure without getting
permission, or "rating agency confirmation", from S&P. In other
words, no refreshed rating would be needed for the company to
draw down the $400 million. Investor consent would not be needed
For other related fixed-income quotations, stories and
guides to Reuters pages, please double click on the symbol:
U.S. corporate bond price quotations...
U.S. credit default swap column........
U.S. credit default swap news..........
European corporate bond market report..
European corporate bond market report..
Credit default swap guide..............
Fixed income guide......
U.S. swap spreads report...............
U.S. Treasury market report............
U.S. Treasury outlook...
U.S. municipal bond market report......
(Reporting by Adam Tempkin; Editing by Ciara Linnane)