The ongoing coronavirus (COVID-19) pandemic has caused multiple companies within the live event industry to shut down upcoming events. Cancellations have led to increasing debt and financial pressure from Endeavor, Live Nation Entertainment, and Sinclair Broadcast Group.
UFC, WME, and IMG are housed under the parent company Endeavor, which already had a long-term debt of $4.6 billion as of August, Variety reports. Then, earlier this year, Endeavor acquired the hospitality firm On Location Experiences for $660 million, Bloomberg News estimated.
S&P Global predicted that Endeavor’s revenue could drop this year by “mid-teens” percentage and the debt could reach a ratio of seven times its earnings, before interest and taxes. The company told Variety that it would take time to determine if Endeavor’s leverage ratio will climb during this pandemic or “if we lose confidence Endeavor and UFC can maintain adequate near-term liquidity.”
Additionally, S&P noted that Live Nation could face a credit downgrade during this time if its leverage ratio increases. Already, Live Nation had $3.3 billion in long-term debt, according to its fourth quarter results. S&P noted that it believes the promoter giant’s “operating performance could be hurt by the growing number of postponed events, lower-than-expected attendance, or any future cancellations.”
Already, Live Nation has postponed concert tours throughout the rest of the month, and that date could be extended as the pandemic gets worse across the country and world. Multiple artists have taken it upon themselves to postpone their own tours past March throughout the spring, while a handful of festivals this spring and summer have been postponed.
“We could lower the rating if we believe the COVID-19 outbreak will be prolonged or worsen live event attendance through additional postponements or cancellations, or if Live Nation cannot successfully manage its cost structure, keeping leverage above 5x,” S&P told Variety.
Sinclair – which acquired 21 regional sports networks from Disney for $9.6 billion – also faces a huge burden, as the company faced $11.1 billion in total debt by the end of 2019. Various sporting events – like the BNP Paribas Open and Masters Tournament 2020 – have been cancelled, while sports leagues have suspended operations for the time being. However, Diamond Holdings president Jeff Krolik believes that there will “always be an appetite for sports on television,” telling Variety that amid the crisis, sports will go on.
“Even in the absence of current live sports, these assets remain extremely valuable, as we anticipate that fans across the country will still tune in to relieve some of their teams’ most exciting and classic games,” Krolik said. “Further, these assets continue to have tremendous long-term value. As of now, this postponement of games is exactly that – a postponement – ultimately sports will return this year and we believe there will be minimal impact in the long-term.”
Coronavirus has caused the live event industry to take a huge hit, leaving fans and executives in the dark, wondering where to go from here.
