Sotheby’s is so mired in debt that some senior staffers received IOUs

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Sotheby’s — one of the world’s largest and most storied brokers of art, jewelry, and other collectibles — could be in trouble. A weakened art market and controversial business decisions by billionaire owner Patrick Drahi have left the auction house mired in debt, the Wall Street Journal reported.

The dual pressures of American political volatility and Chinese economic decline have slowed art sales in recent years: In 2022, the combined value of the top-10 art pieces sold at the bellwether May auctions was $760 million. Last year, it was $403 million. This year, the total was $312 million, according to Bloomberg.

At Sotheby’s, the situation is so dire that some executives questioned whether the auction house would be able to continue paying employees on time. Their alarm was not entirely unfounded: In the spring, some staffers received promissory notes in place of incentive pay. The auction house is also as much as six months behind on payments to art shippers and conservators, according to the Wall Street Journal report.

Since Drahi first purchased Sotheby’s in 2019, the auction house’s debt has nearly doubled — it ballooned from $1 billion to $1.8 billion.

Drahi has long relied on accruing debt to grow his businesses. Before the art market slowed, he invested in RM Sotheby’s and Concierge to expand the auction house’s sales of luxury cars and real estate. Sotheby’s has also spent millions updating retail spaces in Europe, Asia, and North America, the Wall Street Journal reported.

“Under Mr. Drahi’s ownership, Sotheby’s is significantly larger, more diversified and more profitable than ever before,” a spokesperson told the outlet. “During this period, we have invested hundreds of millions to enhance our facilities, technology and expand our offerings to clients.”

In February, Moody’s Ratings lowered Sotheby’s credit rating to B3, citing “governance considerations, particularly the company’s decision to continue dividend payments out of its credit group in 2023 despite its operating performance deterioration.”

Despite growing concerns, it was announced in August that ADQ, an Abu Dhabi sovereign wealth fund, would purchase a $1 billion stake in the company. Charles Stewart, Sotheby’s CEO, told the Wall Street Journal that this would be “a massive credit positive.”

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