Peter Brant, a one-time billionaire and an early patron of artist Andy Warhol, is using part of his contemporary art collection to help recapitalize the family newsprint business, according to state regulatory filings and people familiar with the matter.
Brant, chairman and chief executive officer of White Birch Paper Co. in Greenwich, Connecticut, pledged 56 works of art to the lending arm of Sotheby's, including pieces by Warhol, Richard Prince and Jean-Michel Basquiat, according to a New York state filing. Separate filings show he also pledged pieces to a unit of Deutsche Bank AG and his former business partner, including a 1963 Warhol that one collector said has an estimated market value of as much as $35 million.
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The 65-year-old industrialist, who is married to supermodel Stephanie Seymour, ranks as one of the largest contemporary art collectors in the U.S., having purchased his first Warhol in college. With top artwork fetching record bids at auction, Brant joins wealthy collectors such as former hedge-fund manager Michael Steinhardt in taking out loans backed by paintings to fund other ventures.
"Most banks are not lending to operating businesses today, so people are looking for alternative sources" of capital, said Andrew Rose, the founder of Art Finance Partners LLC, a New York firm that provides credit solutions to owners of unconventional assets, including art, antiques and collectibles. "If you already have a home-equity loan and a margin balance on your stock portfolio, where else do you go?"
Tisha Kresler, a spokeswoman for Brant, said the collector doesn't discuss the size and value of his art collection. Brant didn't return telephone calls seeking comment.
Brant's collection provided at least some of the capital needed to buy White Birch, ranked among the top three newsprint producers in North America, out of bankruptcy, according to a person familiar with his plans, who asked for anonymity because the information is private.
White Birch, co-founded by Peter's father, Murray Brant, in 1941 under the name BATO Co., filed for bankruptcy protection in February 2010 after newsprint prices plunged. According to a reorganization plan filed the following year, a team comprised of the Brants and Black Diamond Capital Management LLC agreed to acquire the newsprint company's assets for $94.5 million in cash and $78 million in debt.
The Brant family and Greenwich-based Black Diamond, whose specialties include distressed credits, announced on Sept. 18 that they had completed the purchase of White Birch's assets, which include three pulp and paper mills in Quebec and a fourth in Ashland, Virginia. Brant said at the time that his family and Black Diamond made a "significant new investment" in White Birch.
Brant will also use part of the proceeds from the borrowings to finance the purchase of another major piece of artwork, the person familiar with the plans said.
Citi Private Bank has seen a "real uptick" in art-related financing over the past five years, according to Suzanne Gyorgy, head of the art advisory and finance group of the Citigroup Inc. unit.
"This is partially due to the fact that there are more art collectors, and also that the value of their collections has increased dramatically," Gyorgy said.
During May, Mark Rothko's "Orange, Red, Yellow" sold for $86.9 million at Christie's in New York, pacing the largest-ever postwar and contemporary art auction, while Roy Lichtenstein's "Sleeping Girl" sold for $44.9 million at Sotheby's. The prices were records for both artists.
Hedge-fund manager Steinhardt and his wife last year pledged 20 paintings and drawings, including five by Pablo Picasso and one by Jackson Pollock, as collateral for a loan from JPMorgan Chase Bank NA, according to New York state records. They used the money to help finance a project that calls for the former American Stock Exchange building to be converted into a retail and hotel complex.
Sotheby's Financial Services Inc. made a Sept. 13 filing with the state of New York that showed the auction house's lending unit was holding 56 pieces from Brant's collection as collateral, ranging from works by Warhol, Basquiat, Lichtenstein and Jeff Koons to those by younger artists, such as Elad Lassry and Wade Guyton. Also on the list was "Deodorized Central Mass with Satellites," a room-sized installation that hedge-fund manager Adam Sender sold in 2006 for $2.7 million, an auction record for the late artist Mike Kelley, who committed suicide earlier this year.
According to the parent company's annual report, Sotheby's Financial Services provides consignment loans secured by artwork that borrowers have contractually committed to sell through the auction house, permitting them to get some of the proceeds as much as a year ahead of time. The auction house also makes term loans, for a defined period of time, on works that clients aren't planning to sell, in part to "establish or enhance mutually beneficial relationships with borrowers" that can lead to future consignments, the company said in its annual report.
Sotheby's generally will make loans equaling as much as 50 percent of the value of the collateral, though the auction house will sometimes allow a higher loan-to-value ratio, according to the annual report. While traditional lenders such as banks provide loans at a lower cost to borrowers, Sotheby's said in its annual report, few will accept works of art as the sole collateral.
"Bank appraisers have no idea what a Monet is worth," said Rommel Dionisio, an analyst at Wedbush Securities in New York. "Sotheby's does."
It's difficult to assess the value of the collection pledged to Sotheby's, in part because the filing only specifies the artist's name and work for each piece while omitting their size, medium and date, said Todd Levin, who runs a New York- based art advisory firm under his own name.
Warhol often did silkscreens of varying size and number for each of his subjects, with 302 "Jackie" paintings and 477 "Flowers" paintings documented in the Andy Warhol Catalogue Raisonne, according to Neil Printz, the publication's editor at the Andy Warhol Foundation for the Visual Arts in New York. More than half of the collateral with Sotheby's consists of photographs, which generally sell for less than paintings.
Deutsche Bank Trust Co. Americas disclosed in a filing last month with the Connecticut Secretary of State that it received five works of art from Brant under a borrowing and security agreement dated July 31. The collateral includes a 1986 version of Warhol's "Last Supper" that is identical to a piece that sold at Sotheby's for $6.8 million almost two years ago as well as a color photograph by Cindy Sherman that sold for $2.9 million at Christie's in May.
According to a separate September filing with New York state, Brant also pledged a 1963 Warhol work entitled "Merce" to Joseph Allen, his cousin and former business partner at White Birch. The 82-inch by 81.5-inch silkscreen of the late dance director Merce Cunningham sold in 1989 for about $2 million and is now worth $25 million to $35 million, said a person familiar with the piece who requested anonymity because the information is private.
Brant, having made monthly visits to the Frick Collection with his father while growing up in the Queens section of New York City, began collecting art in college through the purchase of two Warhols and a Franz Kline, according to his website and a profile published by Sotheby's. He paid for them with money he earned trading securities, including convertible bonds of Occidental Petroleum Corp., while attending the University of Colorado, according to a January 2010 interview in the New York Times.
Brant went on to buy so many Warhols that the artist eventually asked to meet him, the New York Times said. He became part of Warhol's inner circle and, after the artist died in 1987, purchased Warhol's Interview magazine and made it part of Brant Publications.
Brant collaborated with PBS in creating a 2006 documentary on Warhol that won an Emmy Award, according to Brant's personal website. He was also the executive producer of the 1986 movie "Basquiat," as well as "Pollock," a movie released in 2000 that was based on a biography of one of the premier abstract expressionist painters of the 20th century. Brant is a board member of the Museum of Contemporary Art in Los Angeles.
In the New York Times article, Brant said that his art collection had become more lucrative than the family company during the previous year. A court filing by Brant, cited by the New York Times, said his net worth had slipped to $500 million from $1.4 billion in 2007 as newsprint prices tumbled, pushing White Birch closer to bankruptcy.
As the head of White Birch, Brant bought additional manufacturing operations from 2004 to 2006, including a Quebec plant once owned by Enron Corp., turning it into the second- largest newsprint manufacturer in North America, with a 12 percent market share at the end of 2009, bankruptcy court filings show. Its net annual net sales equaled about $667 million at the time, according to the court documents.
White Birch filed for bankruptcy protection in February 2010, stating in court documents that the recession and rising Internet usage had cut the demand for newsprint, costing the company $380 million in revenue since the fourth quarter of 2008.