S&P lowers credit rating of Sotheby's

Chennai: The global credit rating agency Standard & Poors (S&P) has lowered the corporate credit rating of Sothebys Holdings Inc to single-B-plus from double-B-plus, based on expectations that the worldwide art auction market will experience difficulties in 2002 and that Sothebys will continue to be challenged by heightened competition for consignments of significant collections and valuable individual properties.

The auctioning company, however, remains on S&Ps CreditWatch list, but the implications were revised to negative from developing. The New York-based Sothebys had about $230 million total debt outstanding as of 31 December 2001.

"The negative CreditWatch listing reflects the possibility that additional adversities from the uncertain business outlook and from the adverse court ruling on 13 March 2002 by the US Second Circuit Court of Appeals, which renewed the companys exposure to liabilities from additional class action litigation, could cause Sothebys difficulty in negotiating a new bank credit facility," says S&P credit analyst Gerald Hirschberg.

"Although Sothebys remains vulnerable to renewed litigation, it is not likely that there will be any liabilities during 2002, and the company is hopeful that its own legal position will prevail," says Hirschberg.

According to the rating agency, the previous developing CreditWatch listing incorporated some upside potential for the rating, based on the possibility that Sothebys might have been sold to an entity with a stronger credit profile. But no transaction has been completed for about a year, and S&P believes the chances for a sale of the company in the near term have diminished.