On September 11, 2009, the New York Times reported that Art Capital Group, the art finance lender that filed a lawsuit in New York Supreme Court in July claiming that Annie Leibovitz owed it hundreds of thousands of dollars, settled out of court with Ms. Leibovitz. However, as the Times reported, the photographs and the homes remain pledged as collateral for the loan, and another deadline to pay back the loan could arrive in the next few months, placing both Art Capital’s and Leibovitzs’ respective positions unresolved. Such a deadline means that Ms. Leibovitz’s work remains cut out for her. Indeed, as the Times also reported, if Ms. Leibovitz does not pay back the loan, Art Capital could still foreclose and sell her photographs and her homes in Manhattan and Rhinebeck, N.Y.
As we have mentioned in the past, artwork pledged as collateral is increasingly common, particularly when other assets have lost value in the economic downturn. As this article in the Telegraph points out recent high-profile examples of art as collateral include the following two transactions: The Triumph of Music and The Sources of Music by Marc Chagall, as collateral for an existing loan of $35 million from JP Morgan Chase, put up by The Metropolitan Opera works by Picasso, Warhol and Dali from the collection of he American artist and filmmaker Julian Schnabel to help finance the development of an apartment block in New York. The article quotes Christie’s president Marc Porter as stating that the art lending business is changing. “For years, one of the reasons this wasn’t especially big business was that everyone was getting money for something else. It was easy money everywhere. But now people are looking to every asset to unlock cash.” There are myriad legal issues that attend to the use of art as collateral, particularly since such loans are primarily commercial transactions governed by the Uniform Commercial Code. Lenders, borrowers, dealers, collectors and other involved in such transactions are encouraged to speak with an attorney prior to, during, or after, engaging in such a transaction to full understand the complexities involved.