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Sotheby’s is taking advantage of lenders to fund a $ 300 million dividend to its owners, led by businessman Patrick Drahi, after returning to profitability thanks to cost cuts and layoffs during the pandemic.
The auction house, which Drahi agreed to buy in 2019 for $ 3.7 billion, plans to raise cash from a debt sale organized by banks, including Goldman Sachs, according to documents reviewed by the Financial Times.
The dividend is the second in six months, adding to another $ 165 million debt-financed distribution in November. DraF BidFair USA owns 94% of Sotheby’s.
With the reduction in borrowing costs by the U.S. Federal Reserve, there has been a boom in so-called dividend recapitulations from private equity groups and other homeowners, who take out loans to finance bumper payments of companies that have acquired.
Sotheby’s has benefited from a recent rebound in the global art market and told potential creditors on Wednesday it expected to report an adjusted profit of between $ 13 million and $ 15 million in the three months to the end of March, in compared to a loss in the same quarter. last year.
The auction house generated a profit of $ 39.1 million for 2020 as a whole, compared to a loss of $ 71.2 million in 2019, a year that included significant costs related to its sale to Drahi. The company also revealed that it aggressively reduced costs during the pandemic, reporting in its annual report $ 98 million in savings from lower compensation and layoffs.
Sotheby’s did not immediately respond to a request for comment.
Global art sales it fell 22% in 2020 to $ 50.1 billion, according to Art Basel and UBS. The strength of the recovery will be put to the test this week when Sotheby’s and rival Christie’s make their sales of impressionist and modern art twice a year.
Auctions offer one of the best measures of demand for trophy works and are among the only sales visible to the public.
Among the star lots of Wednesday’s Sotheby’s sale is Claude Monet’s painting “Water Lily Pond”, which the artist crafted between 1917 and 1919 and has changed hands several times, even at Sotheby’s in 2004. The auction house expects to raise $ 40 million or more for the work.
Drahi, a telecommunications trader who was born in Morocco and held French, Israeli and Portuguese citizenship, is known for his use of debt to structure complex agreements, including the acquisition of Sotheby’s.
Analysts at rating agency S&P Global characterized Sotheby’s November dividend as an example of the “aggressive financial policy” through which it operates.
It was still unclear what interest the company would have to pay for its $ 300 million planned bond. On Wednesday afternoon, calls were made with potential lenders to measure demand.
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