Sothebys (NYSE:BID) has announced that it has been awarded an additional $200 million in credit, from a group of lenders that includes General Electric Capital Corp. As per the agreement, Sothebys does not have to return the funds until February 2016. The increased credit line comes at a very crucial time for the company as it prepares for conducting sales in New York, to be held in November this year. The move has pushed the company credit line to a total of $800 million.
Sothebys has stated that it would use the additional funds to finance guarantees, paid to sellers by the auction house, regardless if the auction succeeds or fails. Guarantees have become an important and effective weapon for attracting business. Currently, Sothebys has to compete with two other auctioneers in the city. The city of New York is going to be the battleground as all three companies try to gain attention of the “Semi-annual Sales of Impressionist, Modern, Postwar and Contemporary Art”. Guarantee rates have been on the rise in the world of auctioneering and to cope with its competitors, Sothebys upgraded its outstanding auction guarantees from $300 million. The update was made in August 2014 and the new price was set at $600 million.
Sothebys had recently spent a total of $500 million in providing a guarantee for a collection of paintings, acquired from the estate of former CEO, Alfred Taubman. Many analysts were of the view that the company had spent too much too soon, but the recent addition of $200 million would ensure that the auctioneer is able to attract additional business. Currently, the market for auctioning postwar and contemporary art is dominated by Christies, which still holds a significant advantage over its competitors. Christies is still thought to have a larger reserve of funds set aside for the November auctions.
Sothebys (NYSE:BID) experienced trade volumes of 0.00, but still managed to post a gain of 1.32% during the September 16 session, before closing at a share price of $35.19.