The financing arm of art auction and private sale brokerage Sotheby's is preparing its inaugural asset-securitization deal, selling $500 million in asset-backed securities to investors. Revenue from a pool of loans on art and collectibles will repay the notes from Sotheby's ArtFi Master Trust, 2024-1.
Sotheby's Financial Services, the brokerage's financing arm, will sponsor the deal and be servicer and administrator on the transaction. The transaction uses a master indenture trust structure, according to DBRS Morningstar, and Asset Securitization Report notes that, at press time, the deal is slated to price this week and DBRS is the only rating agency on the deal.
The transaction will offer five tranches of A, B, C and D class notes to investors, and ASR's deal database estimates that price talk ranges from 150 basis points over the three-month I-Curve and the three-month Secured Overnight Financing Rate (SOFR) on the AAA-rated A1 and A2 notes. Meanwhile, guidance on the AA- to BBB-rated notes ranges from 170 bps to 270 bps, over the three-month I-Curve, according to the ASR database.
The ASR database notes that Barclays, BNP Paribas, Credit Agricole Securities, Mitsubishi UFJ Securities, Morgan Stanley and Nomura Securities International are all managers on the deal.
DBRS notes that the deal has a two-year revolving period that ends March 1, 2026, DBRS said. The trust will not pay or accumulate any principal during that period, and after that the amortization period starts, the rating agency said. March 22, 2027 is the final scheduled principal payment date, while the series has a scheduled Dec. 22, 2031 maturity date, DBRS said.
The Sotheby's focus on high quality merchandise and its loan portfolio's strong historical performance are credit positives, DBRS said. Only works of art or collectible items that the brokerage or its affiliate auction entities would offer can be included in the collateral pool, the rating agency said. Also, Sotheby's does not originate loans secured by non-fungible tokens or other similar digital asset that does not tangibly exist.
Sotheby's Financial Services, based in New York became a subsidiary of Bidfair USA in October 2019, along with the Sotheby's Inc.
