After its breakthrough deal in 2024 that defined the art loan ABS sector, Sotheby's Financial Services is preparing its second deal, this time raising $600 million.
Sotheby's ArtFi Master Trust, 2026-1, is a 144A deal that will issue notes under a master indenture, in line with the 2026-1 indenture supplement, according to Morningstar DBRS. The deal offers five classes of notes through six tranches, including two class A notes, and they will all mature by June 20, 2033, DBRS said.
The notes will be benchmarked primarily to a fixed rate, with the A2 notes pegged to the term Secured Overnight Financing Rate, DBRS said.
ArtFi Master Trust, 2026-1 has a two-year revolving period, and no principal will be paid to, or accumulated for the benefit of the notes, the rating agency said.
When the deal repays noteholders, it will start on a pro rata basis to the A1 noteholders, and then the structure suggests it will repay classes B, C, D and E.
The notes will benefit from a reserve account, which will be funded unless a default event occurs, DBRS said. Also, unless an early amortization period is in place, the transaction will deposit an amount equal to interest due on the class RR notes, the rating agency said.
If an early amortization event is in place, ArtFi will treat cash flows as available principal collections for such a payment date in an amount up to the series 2026-1 note principal amount, DBRS said.
It will do this if no deposit will be required, unless the series 2026-1 is experiencing a shortfall in interest. Eventually, the deal will pay the outstanding note balance, which will be treated as excess non-principal collections, DBRS said.
After interest, principal payments will also be made sequentially, according to the rating agency.
ArtFi Master Trust enjoys several forms of credit and liquidity protection. For one, an early amortization trigger could be set off if a transferor experiences an insolvency or bankruptcy. Another qualifying event is if the issuer becomes subject to new regulatory measures or becomes taxable as an association or publicly traded partnership, DBRS said.
DBRS assigns ratings ranging from (P) AAA (sf) on the A1 notes to (P) BB (sf) on the class E notes, the rating agency said.
