-- Sotheby's Purchases its York Avenue Flagship Headquarters and Auction Facility in New York City
-- Sotheby's Repurchases Bonds
-- Sotheby's Successfully Amends Bank Credit Agreement
NEW YORK, Feb. 9, 2009 (GLOBE NEWSWIRE) -- Sotheby's (NYSE:BID) today announced that it has successfully completed the purchase of its York Avenue flagship headquarters and auction premises in New York City on February 6, 2009 for $370 million. The purchase price was funded by the assumption of the prior owner's mortgage of $235 million at a rate of 5.6%, a $50 million cash payment, which was made in January 2008, and an $85 million cash payment which was funded at closing last Friday.
"Sotheby's New York headquarters are the premier auction facility in the world and integral to our business," said Bill Ruprecht, President and Chief Executive Officer of Sotheby's. "The building is a strategic asset to this organization and we are extremely excited to be able to own it once again."
In addition to all the benefits that ownership of the York Avenue building brings to Sotheby's, another positive aspect of the building transaction is that it has eliminated Sotheby's capital lease obligation on the York Avenue property which had a 10.4% rate and replaced it with a mortgage obligation at a rate of 5.6%. This will result in annual cash interest expense savings on the building of approximately $4 million in 2009.
Sotheby's also announced that in December and January it had repurchased $21.8 million of its $150 million aggregate outstanding 7.75% Senior Notes due June 15, 2015 for $12.1 million which represented an average cost of 56 cents on the dollar for these repurchases. The pre-tax gain associated with these repurchases was $9.1 million. The Company will continue to monitor the market and may purchase additional bonds opportunistically, when the pricing is favorable.
The Company also announced that it successfully completed an amendment to its senior secured credit agreement with its existing banking syndicate which allows the Company more flexibility on its covenants. As a result of the amendment, the interest rate on our borrowings will move from LIBOR plus 1.75% to LIBOR plus a margin between 3.25% and 4.5% depending on the Company's quarterly leverage ratio. Additionally, the Company's total borrowing capacity was reduced from $300 million to $250 million, all of which is currently undrawn.
"With the additional leverage that Sotheby's incurred to purchase the York Avenue property, Management thought it prudent to amend its existing banking agreement to gain flexibility with respect to our loan covenants. Additionally, Management concluded the reduction in the total borrowing capacity is appropriate in light of the Company's current cash balances and projected liquidity needs," said Bill Sheridan, Chief Financial Officer of Sotheby's.
About Sotheby's
Sotheby's is a global company that engages in art auction, private sales and art-related financing activities. The Company operates in 41 countries, with principal salesrooms located in New York, London, Hong Kong and Paris. The Company also regularly conducts auctions in six other salesrooms around the world. Sotheby's is listed on the New York Stock Exchange under the symbol BID.