Using Warhols to Save a Failed Company
Long before Peter Brant became a billionaire, he was collecting paintings by Andy Warhol, buying his first while he was in college. Today the 65-year-old industrialist, and husband of supermodel Stephanie Seymour, ranks as one of the largest contemporary art collectors in the U.S.
Brant lost his billionaire status when his family’s newsprint company, White Birch Paper, filed for bankruptcy in February 2010 after newsprint prices tumbled. In a court filing, Brant said his net worth slipped from $1.4 billion in 2007 to less than $500 million in 2010.
Now Brant is using his Warhols to help recapitalize White Birch. The Brant family and Greenwich-based Black Diamond Capital Management, an investment firm that buys distressed debt, announced on Sept. 18 that they had purchased White Birch’s assets, which include three pulp and paper mills in Quebec and a fourth in Ashland, Va. Brant’s collection backed a loan that provided at least some of the capital to complete the deal, according to a person familiar with his plans who was not authorized to speak publicly.
Brant pledged 56 works of art as collateral for a loan from Sotheby’s Financial Services, according to a filing by the auction house with New York State. The filing, which did not state the amount of the loan, said Sotheby’s was holding pieces from Brant’s collection including works by Warhol, Jean-Michel Basquiat, Roy Lichtenstein, Jeff Koons, and younger artists such as Elad Lassry and Wade Guyton. Also on the list was Deodorized Central Mass with Satellites, a room-size installation that hedge fund manager Adam Sender sold in 2006 for $2.7 million, an auction record for the late artist Mike Kelley.
A unit of Deutsche Bank disclosed in an August filing with the Connecticut secretary of state that it received five works of art from Brant as collateral for a loan dated July 31. The works include a 1986 version of Warhol’s Last Supper that’s 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. Along with investing in White Birch, Brant will use part of the proceeds from the borrowings to finance the purchase of another major piece of artwork, says the person familiar with his plans. Brant declined to comment.
Sotheby’s lends as much as 50 percent of the value of collateral and sometimes allows a higher loan-to-value ratio, according to its annual report. “Most banks are not lending to operating businesses today, so people are looking for alternative sources” of capital, says Andrew Rose, founder of Art Finance Partners, a New York firm that arranges loans 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?”
Brant made monthly visits to the Frick Collection with his father while growing up in Queens, New York, and began collecting art while at the University of Colorado with 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, 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 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, which includes Art in America and The Magazine Antiques.
White Birch’s predecessor company was co-founded by Murray Brant, Peter’s father, in 1941. Brant went to work for the company, rising to chief executive officer, a title he still holds. As CEO, he bought additional manufacturing operations from 2004 to 2006, including a Quebec plant once owned by Enron, turning it into the second-largest newsprint manufacturer in North America, with a 12 percent market share at the end of 2009, according to bankruptcy court filings. White Birch’s 2010 bankruptcy filing stated that the recession and rising Internet usage had cut demand for newsprint, costing the company $380 million in revenue since the fourth quarter of 2008.
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. Steinhardt and his wife last year pledged 20 paintings and drawings, including five by Picasso and one by Jackson Pollock, as collateral for a loan from JPMorgan Chase, 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. Citigroup’s Citi Private Bank has seen a “real uptick” in art-related financing over the past five years, says Suzanne Gyorgy, head of its art advisory and finance group. “This is partially due to the fact that there are more art collectors,” she says, “and also that the value of their collections has increased dramatically.”