Philip Borof of Bloombergs has an article stating the rating of Sotheby's debt is approaching junk status. The current rating of BBB- is the lowest investment grade ranking assigned by Standard and Poors. In addition, Sotheby's renogtiatied lines of credit to allow for greater exposure but at the expense of much higher interest rates. Much of the issues surround an estimated $50 million in losses from lot guaratnees and of course the slowing of the art market int he 4th quarter of 2008. Complicating debt issues was the requirement to purchase back it HQ building in NY, which it sold in 2003. Sotheby's stock has fallen 84% since its high in October of 2007. The stock is currently trading around $9.00 per share. Sotheby's releases its 4th quarter financial at the end of February.
Borof states
Sotheby’s credit rating may be cut to junk as the 265-year-old auction house’s revenue falls and its leverage increases amid what it calls “significant” losses from guarantees. “We believe that revenues will decline substantially over the near term due to the decline in the worldwide art auction market,” Standard & Poor’s said in a statement yesterday, when it disclosed the possible downgrade.
To read the Bloombert article, click HERE.
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