Refinancing deals double amount available for guarantees to $600m
Sotheby’s has taken an aggressive financial position ahead of the next major sales seasons in London in October and New York in November. The company has doubled the “maximum permissible amount of net outstanding auction guarantees” from $300m to $600m, according to an SEC filing on 25 August.
The auction house has also increased its liability from $600m to $850m in “aggregate commitments under the credit agreements”. These agreements are with “an international syndicate of lenders led by General Electric Capital Corporation”, according to the filing.
The moves follow a capital allocation plan announced in January, in which the company established separate financial structures for its two main businesses: Agency (auction and private sales) and Financial Services (which mainly deals with loans to collectors and dealers who offer art as collateral). As of 22 August, the “Agency” credit agreement was increased from $150m to $300m and the “Finance” agreement was increased from $450m to $550m.
The capital plan has been interpreted as a bid to drive shareholder value in the face of criticism from “activist investor” Dan Loeb, who has since joined the Sotheby’s board. The auction house, which is a public company, has also been under pressure from Christie’s, its privately owned rival. Christie’s held the most expensive auction of art ever on 13 May with an evening sale of post-war and contemporary art that totalled $744.9m. Sotheby’s equivalent auction realised $364.4m.
The recent refinancing is “part of Sotheby’s renewed effort to take advantage of opportunities in the marketplace to grow the business”, says a spokesman.