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Sears completes biggest-ever IP securitisation

IAM columnist Bruce Berman was in touch over the weekend to point out a Business Week story which claims that Sears has just completed a $1.8 billion securitisation of some of its biggest brand names - Kenmore, Craftsman and DieHard. The move, which was actually done last May, involved the transfer of the names to a Sears insurance subsidiary based in Bermuda and protects them from potential bankruptcy proceedings in the future. Although Sears is saying this is merely an internal move designed to improve the liquidity of the insurance company, there is, according to filings seen by Business Week, provision for the brands to be licensed out to third parties. Nor has a full-scale sale of the securitised brands been ruled out. If this were to happen, it would mean Sears could realise that $1.8 billion.

Although IP securitisation has been around for quite a while now – since those Bowie Bonds issued back in 1997, in fact - most deals have usually been on quite a small scale involving tens of millions of dollars, rather than the billion plus involved here. And it is the size of the Sears deal more than anything else that is significant. All of a sudden, it becomes possible for those outside the small, evangelical IP finance community to see the potential there is in this form of monetisation. Up to now, most IP deals have been done by specialist firms as the major banks have not considered them to be lucrative enough to devote time and energy to selling them and then putting them together. Currently, therefore, much of the expertise is inside smaller financial organisations. But $1.8 billion deals may change that, especially as phone calls and emails are likely to be coming out of large brand owning companies'  finance offices over the coming weeks as CFOs digest what Sears has done. 

It is surely just coincidence, but I got an email from Marc Lucier who founded a specialist IP finance company called Intangible Edge back in 2005. Here is a little of what it said:

I am pleased to announce that on March 30, I joined Deutsche Bank as a Director in the Asset Finance & Leasing (AFL) group in New York. My mandate is to expand Deutsche's structured finance business by originating, structuring and closing alternative asset based financings. While the job is not limited to intellectual property, IP fits solidly in that "alternative" category, so I'm excited about the opportunity to extend what I'd been trying to do with Intangible Edge, except now I'll be doing it with a $1.4 trillion balance sheet behind me … My work with Intangible Edge was extremely stimulating & interesting … Ultimately, though, I determined that many of the products, structures and ideas I've been developing would be more effectively implemented from a much larger platform. That's why I was excited to find my way to Deutsche Bank ….

After that Business Week article, there could be a few more people making similar moves in the coming months.


Joff Wild
IAM Magazine
10 April 2007

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