S&P rates Sotheby’s notes B+

S&P said it assigned a B+ rating with a recovery rating of 3 to Sotheby’s proposed $550 million senior secured notes.

The 3 recovery rating connotes the expectation for meaningful (50%-70%; rounded estimate: 55%) recovery in the event of a payment default.

“The notes will rank equally with Sotheby’s other proposed senior secured obligations, including its $400 million revolving credit facility (RCF) and $550 million term loan B. We assigned our B+ issue-level rating to these facilities on Sept. 17, 2019 and lowered the issuer credit rating on Sotheby’s to B+ from BB-.

“The B+ issuer credit rating reflects our expectation that S&P Global Ratings’ adjusted leverage will be elevated following the acquisition, but will decline quickly as new management eliminates costs, leading to good free operating cash flow generation and leverage in the low 5x in fiscal 2020,” said S&P in a press release.

Proceeds along with proceeds from the issuance of a $550 million rated senior secured term loan B will be used by BidFair USA for acquiring Sotheby’s.

The outlook is stable.

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