Sept. 4 (Bloomberg) -- Christie's International and Sotheby's are offering $1 billion in price guarantees to sellers of Warhols and de Koonings before their fall sales. The two largest auction houses are betting that Russians or Asians will support art prices as a credit squeeze threatens to limit Wall Street bonuses.

Sotheby's said its board set a new limit in August of $500 million in guarantees, or promises of minimum prices to sellers. Christie's said it had similar commitments, including $130 million to $140 million for some $300 million of November contemporary art sales featuring an Andy Warhol ``Liz'' image owned by Hugh Grant.

Bonuses and hedge-fund payouts may decline 5 percent in 2007, New York-based pay tracker Options Group said last month. Consignors such as actor Grant and the London jeweler and collector Laurence Graff are demanding guarantees in case art values slip. Auction houses are wagering prices will hold up.

``A lot of money coming out of the former Soviet Union is going into fine arts and jewelry,'' said Brett Gorvy, Christie's co-head of contemporary art, in an interview on Aug. 23. ``They're buying because they see art as an important asset class or they're building new homes or private foundations. They're not showing concern about the financial markets.''

Market jitters can change buying decisions. The Sag Harbor Antique Shop's sales to hedge-fund managers in the Hamptons dried up as the stock markets fell in August, said dealer John Krug in an interview.

`No Way, Honey'

``When the stock market turns down, the guys say to their wives, `No way, honey,''' Krug said. Sales revived when the indexes rose in late August, he said.

The world's top 10 art buyers in the past year included billionaire Eli Broad, private-equity investor Henry Kravis, and hedge-fund managers Steven Cohen and Kenneth Griffin, said ARTnews magazine.

If a guaranteed item doesn't sell, the auction house takes a loss after paying the seller a promised minimum, which may be at or above the low estimate. If the sale price exceeds the minimum, the auctioneer keeps part of the extra proceeds. Such deals added profit in the boom, Sotheby's and Christie's have said.

Sotheby's and Christie's also make loans to collectors, based on the auction houses' valuations of the art in the collection.

Liz and Elvis

For November, Christie's said its guarantees include Warhol's Liz Taylor painting, valued at $25 million to $35 million, and a Willem de Kooning work, estimated at $16 million to $19 million. The owner of a Warhol Elvis image, valued at $10 million to $15 million, declined a fixed price, Christie's said.

Sotheby's offered guarantees for two high-priced Francis Bacon works, art sellers said. The auction house wouldn't confirm that.

Contemporary art may be most vulnerable to a setback because that sector of the market appreciated faster than works from earlier periods, said New York dealer Richard Feigen.

The most expensive contemporary paintings, which are favored by top 10 buyers, appreciated 37 percent in the first half, or 4.5 times since 1996, according to Art Market Research's Contemporary Art 100 Index of the top 10 percent of works. The same index lost half of its value from 1990 to 1996.

Minimum Prices

London-based Christie's, owned by the French billionaire Francois Pinault, and publicly traded Sotheby's, which is run from New York by Chief Executive Officer William Ruprecht, said the combined $1 billion of guarantees represent contracts and offers of minimum prices to sellers.

Christie's commitments apply to New York's November sales of impressionist to contemporary art, which in May totaled $1.4 billion at the two houses. Sotheby's wouldn't say if its guarantees also are for London's October contemporary sales, which took in about $150 million last year at the auction houses, and will test buyers' moods next month.

As of Aug. 21, Sotheby's said it had offered or promised guarantees of $475 million, close to its ceiling. In April 2006, Sotheby's guarantees were $253.8 million, according to regulatory filings.

Auction houses used to take art on consignment, unlike, for example, retailer Macy's Inc., which can be saddled with unsold inventory. Sotheby's former Chairman Alfred Taubman has said he encouraged advance payments to sellers in the late 1980s as ``a competitive tool.''

Market Product

Now, promises of fixed prices are snowballing, with both houses taking roughly equal risks. ``It's like in the money markets,'' said private dealer Daniella Luxembourg. ``Once you have a product, everybody uses it.''

Phillips de Pury & Co. used guarantees to win art in 2000 and 2001, when Luxembourg ran the company with Simon de Pury. Auction losses the year after the World Trade Center bombings forced Phillips, then owned by LVMH Moet Hennessy Louis Vuitton SA, to retreat from impressionist sales, and it is now a smaller player in the market.

Christie's last year guaranteed the Andrew Lloyd Webber foundation's Pablo Picasso painting, valued at $40 million to $60 million, then withdrew it from sale after Holocaust-related claims. The auction house has declined to comment on the status of its guarantee.

Sotheby's, incorporated in Delaware, and Christie's together auctioned almost $6 billion of art in the first half.

To contact the reporter on this story: Linda Sandler in London at lsandler@bloomberg.net.

Last Updated: September 4, 2007 01:53 EDT