The French billionaire targeting BT for a possible acquisition mortgaged the historic London house of Sotheby’s and borrowed heavily on the proceeds through an international chain of companies ending in Luxembourg.
Telecommunications entrepreneur Patrick Drahi acquired the fine arts auction house in a debt-fueled £ 2.8 billion buyout in 2019.
Recently released reports for the UK branch of Sotheby’s and related companies show that within weeks of gaining control, Drahi formed a new company to complete a sale-leaseback transaction.
At the end of 2020, he bought the Sotheby’s building on New Bond Street in Mayfair for almost £ 230million from his parent company. Most of the price was paid in cash from a £ 150million mortgage on the property. The auction house moved to premises in the center of the London art world in 1917.
Following the sale, Sotheby’s immediately transferred a dividend of £ 100million on a chain of companies to another new entity, Sotheby’s Holdings UK. Its parent company, Bidfair, subsequently borrowed $ 450 million (£ 336 million) from French bank BNP Paribas, backed by its shares in Sotheby’s Holdings UK.
The fate of the loan has not yet been disclosed as Bidfair has not published the accounts. Ultimately, it is controlled by Mr. Drahi through a company in Luxembourg.
Sale and leaseback transactions are a common way to free up capital from properties. However, they have come under attack as “asset stripping” that can weaken businesses, especially if the product is mined from them.
Either way, Sotheby’s Financial Engineering offers a taste of some of the techniques Mr. Drahi used to build his fortune and his Altice telecommunications empire. He has been hailed and criticized as a master of high-level finance and the restructuring needed when debt turns out to be too high. Its tax avoidance structures have also sparked fires in France.
The 58-year-old’s reports are coming under closer scrutiny in the UK after his stealth acquisition of 12% of BT. The move earlier this year was widely seen in the city as a beachhead to gain control or force a radical change in Britain’s former state monopoly.
A block that prevents him from bidding on BT ends next month. His central role in national security inevitably sparked unusually high interest in Drahi as a potential buyer of a British firm in Whitehall.
A spokesperson for Drahi made no comment.
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