Ruprecht: “We’re highly liquid and open for business.”
On the Q3 earnings call today, CEO Bill Ruprecht says the guarantee book will be essentially cleared by next week (they took a $10 million loss on guarantees for the I/M sale and are already taking a $17 million loss on guarantees for next week’s Contemporary art sales.)
Ruprecht repeated his intention not to use guarantees going forward (with the appropriate caveats):
“Going forward, we will generally not be using our capital for Guarantees until stability is restored in the global economic environment and in the financial markets and [or] where we see unprecedented opportunity.”
“We look toward next year comfortable in the knowledge that our liquidity is strong, our margins are stabilized and improving and we have vastly reduced our guarantee exposure. Going forward, we will significantly reduce our guarantee portfolio as well as other special concessions we grant to sellers in order to attain a fair return for our services and this will remain our focus. While no one can predict where sales levels will go in this environment, especially in the near term, the initiatives we will be implementing should position us to be profitable at significantly lower sales levels and to provide positive returns to shareholders even in an environment of unprecedented economic challenge. “
He later described “the door as essentially closed on that part of our business.” In response to a question, Ruprecht characterized it as a desire to “be an agent rather than a principal in transactions.”
Ruprecht also emphasized the strength of the company’s balance sheet and that they expect to return soon the cash they drew down recently in the face of the frozen credit markets. He also made a point of using the company’s balance sheet to advance cash to strapped art collectors who want to sell their art. But they will, according to the CFO, expect a greater return from their loan portfolio.