Details on Guarantees Disclosed in Sotheby's Quarterly Report

The amount of risk involved in auction-house guarantees to consignors (whereby the house agrees to pay the guaranteed amount in the event that bidding does not reach that level) has been the subject of much recent speculation, in light of the failure to sell of several high-ticket guaranteed works in Wednesday's Impressionist/modern sale at Sotheby's.

Sotheby's latest Form 10-Q quarterly filing with the SEC, just released, provides some current statistics.

It shows that the total dollar value of Sotheby's outstanding guarantees as of Sept. 30 amounted to less than the middle of the presale estimate range for the guaranteed property.

Sotheby's 10-Q states:

As of September 30, 2007, the Company had outstanding auction guarantees totaling $458.5 million, the property relating to which had a mid-estimate sales price of $478.1 million. The Company's financial exposure under these auction guarantees is reduced by $6.8 million as a result of arrangements with unaffiliated third parties.

On November 7 and 8, 2007, the Company held its major autumn sales of Impressionist and Modern Art. While these sales were profitable overall, the Company did incur losses on certain auction guarantees that were outstanding as of September 30, 2007 and, as a result, the Company recorded a principal loss of $14.6 million within Auction and Related Revenues in the third quarter of 2007.