In the past I have been posting on art being used more often to collateralize loans. Art as collateral for loans has been growing in popularity with more and more collectors who need added liquidity.
ABC news is reporting that Bank of America is suing two Atlanta area real estate companies for $4.5 million that included a pledged Andy Warhol painting of Dolly Parton as collateral. It appears the bank allowed the borrowers to keep their artwork, which was then sold and the proceeds were not used to payoff the loans, and a default followed.
ABC news reports
Source: ABC News
Companies Default on Loans, Bank of America Goes After its Artwork
Bank of America is suing two Atlanta real estate companies and their executives for defaulting on over $4.5 million in loans, asking one executive to hand over his valuable art collection, including the proceeds from the sale of an Andy Warhol painting of Dolly Parton, to cover part of their debts.
In the complaint, Bank of America alleges Barry Real Estate Companies and BSTwenty, LLC, failed to pay back what they owed from defaulting on loans dating back to 2007. The companies' loans were guaranteed by their founder Harold Barry and CEO Christian Schoen.
In the loan documentation, Barry and Schoen promised certain artwork and its proceeds to cover Barry Real Estate Companies if its loans went into default, which occurred in July 2008.
Bank of America alleges Schoen had 10 paintings, six of which he sold for nearly $2.7 million. He paid back around $1.7 million to Bank of America to help cover some of the debt.
But the bank found out Schoen had also sold his Warhol Portrait of Dolly Parton in May 2012 for $550,000, but failed to fork over the sum.
Schoen allegedly is holding onto four paintings, which were appraised by Christie's to be worth approximately $3.1 million, according to the complaint.
"Due to confidentiality obligations to our client, we are not at liberty to provide information regarding any appraisal we may have provided," said a spokeswoman for Christie's.
Schoen reportedly told Bank of America he would not turn over his artwork, nor the money from the Warhol sale, the complaint stated.
Bank of America said it is owed $4.5 million as of April 17, plus $424.34 in interest each day from the date the complaint was served.
In addition to the artwork and the sum of the sale from the Warhol painting, Bank of America is seeking attorney's fees, unless Barry and Schoen can pay back the amount owed within 10 days of being served.
Spokeswoman for Bank of America Shirley Norton told ABC News the bank had been working with Barry Real Estate Companies, BSTwenty, LLC, and Schoen and Barry, for some time to help them resolve their financial issues and continues to work with them.
Bank of America's attorney, Frank DeBorde, declined to comment on the lawsuit to ABC News.
Through a spokeswoman, DeBorde told ABC News that he did not know if either Schoen or Barry had attorneys. Attempts to reach both men were not successful.
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