Technical lenders make margin calls with low paint prices

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Senior technical lenders asked borrowers to obtain more pictures as a security for their loans because the value of their guarantees has declined in the slowdown in the art market.

The lenders specialized in the sector of 40 billion dollars issued margin calls, as the value of the panels pledged against the loans decreased, which requires borrowers to compensate for the decline by handing over money or swap in the most expensive artwork.

Technical lenders, including Sotheby’s and Christie, take security for the artworks owned by borrowers so that they can seize and sell the pieces in case of failure to pay.

Although the field of specialized financing, the consultations estimated in the 2023 report that the total volume of art -backed loans will grow to $ 40 billion by the end of this year, as the value of artwork pledged to be a guarantee that is likely to be doubled.

SCOTT Milleisen, the head of financial services, said that Sotheby’s, which includes a book of 1.6 billion dollars loans and launched a backed by its artistic loans last year, has made margin calls because “there are very few categories where the value of art has increased in the past 24 months.”

Christie’s, which has an artistic loan backed by about $ 600 million, has also witnessed a “bunch” of “margin call activity”, according to the international administrative director of its financial arm, Sayuri GanePola.

“Most of us have already settled in criticism, given the strength of our borrower’s base, but others have made additional guarantees if this is something they want to do,” said Janibola.

The lenders said that margins in the art financing sector were relatively rare. Adam Ross, the global head of wealth and commercial lending in Deutsche Bank, said that the banks perfectly tried to prevent the margin calls to their customers by realizing any gap in advance.

He said: “Whether this is certain artists who do not perform or abundant paintings from any artist coming to the market, this may lead to a conversation.”

But the softening market meant the flexible demand for art -backed lending despite the highest interest rate environment.

The value of the arts market sales decreased by 4 percent to $ 65 billion in 2023, according to a report issued by ART Basel and UBS Art, with a particularly sharp decrease in many auctions that bring more than $ 10 million. Last year, Sotheby’s total sales decreased by 23 percent to $ 6 billion, while Christie decreased by 6 percent to $ 5.1 billion.

Nishi Sumaya, global head of private banking services, lending and deposits in Goldman Sachs, said that the universities are frequented by low prices that use art supported as a way to create liquidity from something sitting there.

The lenders are generally looking for more than $ 200,000-$ 25,000,000 and more than one artist to avoid the risks of focus, and they prefer the impressionist and modern works over the works of emerging artists without a fixed auction record.

“But the furniture, watches, or some of the most esoteric groups,” said Ben Gore, CEO of Operations at Christie.

But even when the art market is stronger, borrowers can request more guarantees. Ghor said: “Even in strong markets, sometimes some artists see the value due to the directions and passions of some of the markets of some artists,” Ghor said.