Loan on mystery collection leaves pounds 5m hole at Christie's

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Christie's International, the auction house which called off bid talks with SBC Warburg Dillon Read on Wednesday, has been forced to make a pounds 5.3m exceptional charge to its profits because of a loan it made to a vendor on a collection it has not yet sold.

Christie's loaned the money to the owner of an "unusual but important" collection. However, there has been a substantial delay in bringing the collection to the market during which the value of the collection has fallen. It has therefore been forced to make a pounds 5.3m provision against the possible loss on the loan.

The announcement surprised the City though Christie's claimed such loans were standard practice in the art world in order to accommodate collectors who wanted a quick sale but found that a suitable auction may not be possible for some time.

The news knocked the shine off Christie's results which, excluding exceptionals rose by 20 per cent to pounds 40.6m for the year to 31 December. The company made few comments on the collapse of bid talks SBC Warburg. "It was an interesting idea but at the end of the day there wasn't something coming forth that we could recommend," said finance director Peter Blythe. "No formal offer was made and because the discussions were confidential we're not going to reveal details."

Christie's shares fell 10p to 255p as dealers reacted to the abandonment of the talks. It is understood that the Warburg bid, which included six high net worth individuals, was pitched at only 270p-280p per share

The effect of the exceptional item restrained Christie's profit increase to a four per cent rise to pounds 35.3m. Auction sales grew by 20 per cent in sterling terms to pounds 1.2bn in 1997, with the main contribution coming from the sale of two outstanding collections.

The Ganz Collection of twentieth century art realised $207m (pounds 126m), the largest total ever achieved for a single-owner collection at auction. Eighteen lots were sold for more than $1m, 10 of them by Picasso, including Le Reve for $48.4m - the second highest price paid for the artist's work.

The Loeb Collection of mainly impressionist works made $92.8m, the third biggest for a single-owner sale. It included Paul Cezanne's Madame Cezanne du fauteuil jaune for $23.1m and Edouard Manet's Self Portrait for $18.7m.

Sales of Impressionist and modern works of art totalled pounds 388m, up 89 per cent on the previous year.

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