Sotheby’s to use Picasso and Warhol art to back bond

SOTHEBY’S is to bundle masterpieces by artists including Pablo Picasso, Andy Warhol and Rembrandt into a $500m (£400m) bond.

The auction house is putting together almost 90 personal loans given to art collectors, which are tied to the artworks, into a rare bond.

Barclays is currently canvassing potential investors to determine what price to set on the bond, Bloomberg reported.

Through its financial services division, Sotheby’s allows clients to borrow against luxury items that it would offer for sale at auction or through a private sale. The company’s loan portfolio stood at roughly $1.6bn (£1.28bn) at the end of last year, while it has issued more than $10bn of art equity loans and advances since its inception.

Paintings by Rembrandt are the most prominent in the unusual bond, with the Dutch master estimated to account for around 10pc of the total value.

Other high-profile painters whose work will ultimately back the debt include Jean-michel Basquiat and Frida Kahlo.

More than 40pc of the collection is believed to be contemporary art, while Old Master paintings make up a fifth. The total value of the art, alongside other luxury items such as jewellery, watches and wine, is estimated to be about $2.9bn.

Morningstar DBRS is rating the bonds and is expected to grant the majority the top rating of AAA.

In a report this week, Morningstar analysts wrote: “It is through the access to Sotheby’s in-house experts on valuation, authenticity, and provenance, that SFS has established its loan products that enable borrowers to access liquidity in their fine art and collectible assets.”

Meanwhile, Patrick Drahi is considering selling a stake in Sotheby’s, which was founded in 1744.

The French billionaire bought the auction house for $3.7bn in 2019.

Mr Drahi has held discussions about the sale of a minority stake in recent months amid troubles at his highly indebted telecoms group Altice, the Financial Times reported. Sotheby’s was contacted for comment.