(Bloomberg) — Sotheby’s, the public sale home owned by French telecom billionaire Patrick Drahi, is pitching buyers a primary of its type: a securitization of private loans to the rich secured on their artwork collections.

Discussions concerning the providing stay on the early levels however Sotheby’s expects to convey the asset-backed safety to the market later within the yr, based on individuals with data of the matter. 

The corporate began speaking with bond patrons concerning the product final yr, the individuals added, asking to not be recognized because the talks are personal. No closing resolution has been made and the dimensions and timing of the deal might nonetheless change. 

A consultant for Sotheby’s declined to remark. 

Lending to wealthy artwork collectors has been a profitable enterprise for wealth managers for years. Excellent loans in opposition to artwork had been forecast to extend to greater than $31 billion final yr, based on a report by Deloitte LLP, the newest determine obtainable. 

Extremely-high-net-worth people have about $1.5 trillion of their cash tied up in private artwork collections, Deloitte estimates, with valuations fueled by the bull run in markets because the monetary disaster. The costliest portray offered final yr was Andy Warhol’s ‘Shot Sage Blue Marilyn,’ which went for $195 million.

Some specialty finance companies, reminiscent of Artwork Capital Group, have additionally specialised in underwriting art-backed loans, however Sotheby’s can be the primary to convey an ABS-style product to the market, based on knowledge compiled by Bloomberg. It could observe the likes of Credit score Suisse Group AG, which final yr securitized a portfolio of loans tied to yachts and personal jets.

IPO Plan

Final yr, the famend artwork dealer thought-about an preliminary public providing within the US, in search of a worth of about $5 billion excluding debt. Falling share costs subsequently shut the door on new listings. 

Drahi, himself a serious artwork collector, has spoken with Abu Dhabi buyers about changing into anchor shareholders in an IPO and should look once more at itemizing the group this yr, Bloomberg reported final month. 

The conversations concerning the art-linked bond are happening as ABS markets recuperate considerably from the turmoil brought on by rate of interest will increase and debtors come again into the market. Nonetheless, gross sales of the securities stay greater than 10% decrease than presently final yr, based on knowledge compiled by Bloomberg.

–With help from Scott Carpenter.