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Sotheby’s Shores Up Cash Reserves, Cuts Risk Exposure

On Oct. 10, Sotheby’s borrowed $250 million of the $300 million available under a long-term senior secured credit facility with Banc of America, the New York–based investment subsidiary of Bank of America, according to a filing made with the U.S. Securities and Exchange Commission.

NEW YORK—On Oct. 10, Sotheby’s borrowed $250 million of the $300 million available under a long-term senior secured credit facility with Banc of America, the New York–based investment subsidiary of Bank of America, according to a filing made with the U.S. Securities and Exchange Commission. Sotheby’s said the borrowing was undertaken as “a defensive step to ensure additional liquidity” in light of the ongoing financial crisis. Prior to the recent borrowing, Sotheby’s said it had cash and cash equivalents of about $290 million. After accessing the credit line, the house had about $540 million in cash and cash equivalents, according to the filing. Sotheby’s said it plans to invest the proceeds of the loan on a short-term basis in the “highest rated United States Treasury money market funds or the highest rated over-night time deposits of major banks.”

Amid uncertainty about the likely impact of the economy on the art market, Sotheby’s also said it had reduced its level of outstanding guarantees—advances made to consigners regardless of how the artwork or object performs at auction—in comparison with the level of guarantees outstanding at this time last year. Sotheby’s said its current level of outstanding auction guarantees is $306.1 million, for property with a total estimate of $343 million (derived by averaging the high and low estimates), compared with guarantees of $458.5 million outstanding as of Sept. 30, 2007.

According to the filing, the house’s exposure to the current guarantee level is reduced by $63.3 million owing to third-party risk-sharing agreements with unaffiliated partners.

Christie’s, which is privately held, is not required to disclose detailed financial information. Spokesperson Toby Usnik told ARTnewsletter, “Christie’s is in the same business. It would be reasonable to think that we had comparable ­guarantees.”

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