Sotheby's & GE Partner on Taubman Auction

NEW YORK CITY -- Sotheby’s obtained an additional $200 million in credit to finance guarantees, the auctioneer of fine art and collectibles said in a regulatory filing, as the firm and its competitors gear up for their major sales in New York during November.

A group of lenders, led by General Electric Capital Corp., increased New York-based Sotheby’s credit line to $800 million from $600 million through next February, according to this week's filing.

Guarantees, or the undisclosed amount auction houses agree to pay sellers regardless of whether a work is sold or flops, have become a key weapon as Sotheby’s, Christie’s and Phillips compete for trophy pieces amid surging prices. The next battle ground will be the semiannual sales of Impressionist, modern, postwar and contemporary art in New York.

“They need to have this money in order to compete in the contemporary market against Christie’s,” said Emmanuel Di Donna, whose gallery on Manhattan’s Upper East Side specializes in modern and postwar art. “A lot of sellers expect guarantees.”

Taubman Collection

Earlier this month, Sotheby’s won a $500 million trove from the estate of its former chairman A. Alfred Taubman. The company provided a guarantee for the collection, which includes some 500 pieces led by paintings of Willem de Kooning, Pablo Picasso and Mark Rothko and is scheduled for auctions starting Nov. 4.

Meanwhile, Christie’s landed Amedeo Modigliani’s 1917 painting, “Nu Couche (Reclining Nude),” estimated at more than $100 million. That work also comes with a guarantee, Christie’s said.

Taubman's own Modigliani, pictured here, will be offered at the Sotheby's auction, and is likely guaranteed for $25 million.

Dealers said that by guaranteeing the Taubman estate, Sotheby’s depleted much of its war chest, a competitive disadvantage next to closely held Christie’s at a time when final consignments get locked in. Sotheby’s has been trailing its rival in postwar and contemporary art sales, the market’s dominant segment. The deal with GE will obviously enable continued guarantees for consignment of blue-chip lots.

Guarantees have been on the rise throughout the industry in recent years. In August 2014, Sotheby’s doubled its maximum permissible amount of net outstanding auction guarantees to $600 million from $300 million, according to a filing at the time.

While the Taubman estate was something Sotheby’s “could not afford to lose,” said Todd Levin, director of Levin Art Group in New York, the company still must “remain competitive with all regular consignments. They have to run on all fronts.”

Today's homepage Featured Art Video recaps the private artworks coming to auction owned by Alfred Taubman. Valued at $500 million, this trove cannot afford to be lost by Sotheby's -- hence its foray into the capital markets.