Banks and Auction Houses See Increased Borrowing Against Art

By ARTINFO

NEW YORK—Specialists at banks and auction houses are saying that in the face of a volatile stock market and a housing slump, many collectors are looking to take out loans against their art, the New York Sun reports. “Art now is seen as a definite asset class which is traded,” said Caroline Sayan, Christie’s international commercial director. “People are looking at their complete portfolios and thinking about how they can leverage what they have more effectively.”
While select banks and Christie’s and Sotheby’s have offered art financing for a while, more collectors, galleries, trusts, and museums have recently begun to take advantage of it. The banks tend to structure their lending as term loans, which are due on a specific date, or lines of credit. The client may take out a loan against one specific work or an entire group for an amount generally up to 50 percent of the market value of the collateral.
Sotheby’s offers term loans and revolving credit lines as well, but the auction houses more typically extend loans through consignor advances. Sayan said that Christie’s usually advances between 30 and 50 percent of the low estimate of a consignment, while Jan Prasens, managing director of Sotheby’s Financial Services, said the house often advances between 50 to 60 percent of the low estimate, depending on risk.
In order to protect their interests, banks and auction houses will often be named on a borrower’s insurance policy and make UCC filings. They will also sometimes take possession of the collateral, particularly when the art or the borrower is out of the country. Even with these precautions, lenders can be left in the dust, as when dealer Michel Cohen fled the country in 2001 with $10 million in outstanding loans to Sotheby’s. The house eventually succeeded in reducing its losses through a combination of recovery of assets and insurance, and Cohen was arrested in Brazil and then escaped while awaiting extradition.

About visionsart

Visions Art is a premium gallery for Modern and Contemporary Art. Established in 2001 in Mumbai, advising private and corporate collectors on predominantly Indian Contemporary Art. Since 2003, the gallery opened up its new space in heart of south Mumbai, India. The permanent gallery space is designed as a private art space where both changing and its permanent collections are shown. The gallery’s program draws upon a diverse range of disciplines and intellectual perspectives while maintaining a clear progressive thread. Supporting mid-career and historic figures, as well as launching emerging artists. The gallery represents works by artists who are considered to be at the forefront of Indian contemporary art and is constantly looking to establish a roster of the more progressive artists from India and abroad. Indianartnews.info is a news post blog providing a viewers updates on the latest news and events related to indian art from across the world

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