Sotheby’s demonstrates subtle art of wriggling out of a cash squeeze

{"text":[[{"start":4.15,"text":"Despite its prestigious brand, Sotheby’s has long been grappling with less than polished finances. But by dint of some creative financial gymnastics — and an improving art market — it has now managed to buy itself some wriggle room. "}],[{"start":18.5,"text":"For a while, things looked distinctly ropey. Its 2019 purchase by aggressive financier Patrick Drahi left Sotheby’s laden with debt. The Luxembourg-based vehicle that holds the auction business, as well as Sotheby’s lending business, real estate and some of the acquisition debt, had $3.1bn in net borrowings at the end of 2024, or over 11 times adjusted ebitda. Its interest costs of $280mn swallowed up all of its operating profit, and more. The last time it made a pre-tax profit was in 2020: unhelpful ahead of a $765mn debt maturity in 2027. "}],[{"start":null,"text":"

"}],[{"start":57.7,"text":"Since then, however, Sotheby’s has furiously chipped away at its debt. It raised equity from investors including Abu Dhabi-based ADQ at the end of 2024, and sold assets including its York Avenue building in New York. "}],[{"start":71.9,"text":"It also took some more creative steps. Sotheby’s has offered to pay a 7 per cent yield to clients who delay receipt of the proceeds from their auction sales from the usual 45 days to up to nine months. That’s akin to Sotheby’s raising financing for a little less than the current yield on its bonds, and the resulting boost to its cash balances reduces net debt. "}],[{"start":93.85000000000001,"text":"A recovery in the art market is proving useful too. Sotheby’s total auction sales rebounded by a fifth in 2025 to reach $7.1bn. Commission revenue followed, rising by more than a quarter from last year, helping the auction house division post its first profit in years. It has seized on this opportunity to issue senior secured debt maturing in 2031, refinancing the note that was due in 2027. "}],[{"start":121.05000000000001,"text":"Sotheby’s challenges are by no means going, going, gone. A swing to about $53mn of pre-tax profit in 2025 at its main auction business would translate, all else being equal, into the consolidated group barely breaking even. Net debt for the group is still roughly $2.8bn, by Lex estimates, though about $1.6bn sits in non-recourse vehicles tied to its lending arm, Sotheby’s Financial Services. "}],[{"start":150.20000000000002,"text":"Art sales are inherently lumpy, which will forever be a risk for auction houses that depend on them. But for now, the combination of revived sales and financial ingenuity has improved the group’s formerly worrying prospects. Its collage of balance-sheet fixes may not be particularly pretty, but then, not all valuable things are. "}],[{"start":177.45000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776450992_2428.mp3"}