Banks Eye Intangible Assets as Collateral
The banks seek deals in which an insurer agrees to buy a borrower’s intellectual property - anything from a mobile phone patent to a logo or recipe - for a fixed price in case of default. That price could then be counted against the expected losses, in the same way the expected proceeds from a credit default swap can be used today.
The structure was given a boost by last year’s Nortel bankruptcy, where sale of the group’s wireless patents generated more than $4.5bn, five times the price originally offered by Google.
“There is now awareness that these types of assets are fungible and transferable,” said Adam Tepper, global head of corporate development at M.Cam, a US finance company that is working on a couple of proposed structures involving intellectual property.
“We’re giving the insurance companies a pathway to provide new capital to banks,” he said.