Sotheby’s to use Picasso, Warhol and Rembrandt paintings to back $500m bond

Sotheby’s will use works by Picasso, Warhol and Rembrandt as collateral for a bond of $500m (£399m).

The auction house has bundled almost 90 loans to art collectors that are linked to artworks into a special bond.

Bloomberg reported that Barclays has been canvassing investors to decide what price to charge for the bond.

Sotheby’s offers its clients the opportunity to lend money against art or luxury items it will offer at auction or in a private sale.

Since its founding, the company has provided more than $10 billion in art equity loans.

The Dutch master is estimated to be responsible for 10pc or more of the bond’s total value.

Jean-Michel Basquiat, Frida Kahlo and other high-profile artists will also help to pay off the debt.

Over 40pc is contemporary art. Old Master paintings, by European artists of the late-13th century to the early-19th century, make up the remaining 5pc.

Art, jewellery, watches, and wine are all valued at about $2.9bn.

Morningstar DBRS will be rating the bonds, and it is expected that the majority of them will receive the highest rating possible, AAA.

Morningstar analysts stated in a report published this week: “It’s through access to Sotheby’s in-house expert on valuation, authenticity and provenance that SFS established its loan product that allows borrowers to gain liquidity for their collectibles and fine art.”

Asset-backed securities are not the first time that the worlds art and finance have come together.

In 1997, David Bowie introduced the concept by issuing securities that would give investors a portion of the singer’s royalty payments over the next decade.

Prudential, a US-based insurance company, bought the so-called Bowie bonds. They were created by David Pullman and sold by him. Bowie bought back his song rights from his former manager with some of the funds raised.

Mr Pullman has created bonds similar to those of James Brown, a singer. Hipgnosis, a music rights firm, has allowed investors to profit from royalties.

This comes amid reports that millionaire Patrick Drahi may sell a stake of Sotheby’s which was founded in1744.

The French tycoon purchased the auction house in 2019 for $3.7bn, bringing it under private ownership for first time in three decades.

The Financial Times reported that Mr Drahi had held discussions in recent months about selling a minor stake amid problems at his heavily-indebted Telecoms Group Altice.

Sotheby’s was contacted to get a comment.