Moody’s prunes Sotheby’s

Moody's Investors Service said it downgraded Sotheby's ratings, including the corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD and the ratings on the existing backed senior secured notes, senior secured notes and senior secured bank credit facilities to B3 from B2.

Additionally, the agency downgraded Sotheby's (Old) senior secured notes rating to B3 from B2.

“The downgrades reflect Sotheby's EBITDA declines in both 2022 and 2023 following lower buyer demand in a weakened art auction market as a result of higher interest rates, geopolitical issues in the Middle East and Eastern Europe and a slowdown in China on top of general consumer weakness. While aggregate sales volumes have been resilient over the past couple of years reflecting strength on the supply side for auctions, margins have declined because of cost pressures with the company having to spend more on guarantees, risk sharing and marketing to facilitate sales.

“The downgrade also reflects governance considerations, particularly the company's decision to continue dividend payments out of its credit group in 2023 despite its operating performance deterioration and its very high leverage. Sotheby's has paid out approximately $225 million of dividends in 2022-2023 reducing the company's liquidity cushion and ability to deleverage,” Moody’s said in a press release.

The outlook is stable.

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