Sotheby’s is to use masterpieces by artists including Picasso, Warhol and Rembrandt to back a $500m (£399m) bond.
The auction house is bundling almost 90 personal loans given to art collectors, which are tied to the artworks, into a rare bond.
Barclays is currently canvassing potential investors to determine what price to set on the bond, Bloomberg reported.
Through its financial services division, Sotheby’s allows clients to borrow money against artworks or other luxury items that it would offer for sale at auction or through a private sale.
The company’s loan portfolio stood at roughly $1.6bn at the end of last year, while it has issued more than $10bn of art equity loans and advances since its inception.
Paintings by Rembrandt are the most prominent in the unusual bond, with the Dutch master estimated to account for around 10pc of the total value.
Other high-profile painters whose work will ultimately back the debt include Jean-Michel Basquiat and Frida Kahlo.
More than 40pc of the collection is believed to be contemporary art, while Old Master paintings – works by European artists from the late-13th to early-19th centuries – make up a fifth.
The total value of the art, alongside other luxury items such as jewellery, watches and wine, is estimated to be about $2.9bn.
Morningstar DBRS is rating the bonds and is expected to grant the majority the top rating of AAA.
In a report this week, Morningstar analysts wrote: “It is through the access to Sotheby’s in-house experts on valuation, authenticity, and provenance, that SFS has established its loan products that enable borrowers to access liquidity in their fine art and collectible assets.”
David Bowie issued securities that gave investors a share in the singer’s royalties in 1997
Credit: Dylan Martinez/REUTERS
It is not the first time the worlds of art and finance have collided in unorthodox asset-backed securities.
The concept was pioneered in 1997, when David Bowie issued securities that gave investors a share in the singer’s royalties over the next decade.
The so-called “Bowie bonds”, conceived by banker David Pullman, were bought by US insurance giant Prudential. Bowie used some of the money raised to buy back the rights to his songs from his former manager.
Mr Pullman created similar bonds for a number of other celebrities, including singer James Brown. More recently, music rights firms such as Hipgnosis have allowed investors to cash in on royalties.
It comes amid reports that billionaire Patrick Drahi is considering selling a stake in Sotheby’s, which was founded in 1744.
The French tycoon bought the auction house for $3.7bn in 2019, taking it into private ownership for the first time for three decades.
However, Mr Drahi has held discussions about the sale of a minority stake in recent months amid troubles at his highly-indebted telecoms group Altice, the Financial Times reported.
Sotheby’s has been contacted for comment.
