By pressmaster @ Adobe Stock
The market for art is tanking and putting big auction houses like Sotheby’s at risk. I don’t speculate in art, ever. At The Wall Street Journal, Kelly Crow, Matt Wirz, and Ben Foldy discuss the state of the market for art and Sotheby’s current problems. They write:
The art market is grinding through a rough patch, and no one is feeling the pain more than Sotheby’s.
The sales downturn, driven in part by China’s economic slowdown, wars and volatile U.S. elections, has hit at a crunchtime for the auction house’s highly leveraged billionaire owner, Patrick Drahi, who is fighting fires amid restructuring in his broader telecom empire, Altice.
Sotheby’s had been riding a rollicking art market wave in recent years, bringing in at least $7 billion in sales annually and setting record-level prices for trophies by Gustav Klimt and René Magritte.
Now, amid signs cash is running low, it is pushing off payments to its art shippers and conservators by as much as six months. Several former and current employees said Sotheby’s this spring gave senior staffers IOUs instead of their incentive pay. And at a meeting this month of higher-ranking executives, some executives expressed worries about whether the company would be able to keep paying its employees on time, according to a person familiar with the discussion.
Drahi has at the same time been under pressure to slash the crushing debt of roughly $60 billion at Altice. The conglomerate’s French arm is now going through restructuring talks with creditors, with the U.S. arm expected to enter restructuring talks later. Some Wall Street analysts had hoped Drahi might sell part of Sotheby’s to help bolster Altice.
Sotheby’s itself carries $1.8 billion in debt, almost double the level it had before the Franco-Israeli billionaire purchased it in 2019. The value of its bonds swooned in the first half of the year as investors worried that declining sales and higher interest rates would choke off the company’s cash flow.
The auction house received a lifeline with a $1 billion deal to sell a stake to Abu Dhabi sovereign-wealth fund ADQ, announced Aug. 9 but not expected to close until later this year. At the time, Drahi said he would contribute an undisclosed amount as part of the deal.
As it awaits the funds, Sotheby’s is toeing a high-wire act with an uncertain outcome.
Read more here.
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