Live Nation bought itself additional time with creditors with an extension of its credit agreement from the end of September of this year all the way through the end of December 2021. The move allows the entertainment giant to focus on keeping operations afloat in the period of little to no revenue rather than worry about servicing the debt incurred.
“This amendment provides us additional financial flexibility so that Live Nation is ready to unite fans and artists quickly when the time is right,” said President and CEO Michael Rapino in a statement. “Given our strong liquidity position, we believe the change to a liquidity test allows the seamless operation of our business over the next year, by which time we expect concerts to be returning to scale.”
Much of the entertainment business appears to be gearing up to survive through all of 2020 and at least some of 2021 without the ability to stage large-scale events. Broadway is already shuttered through the end of the year, and most sporting events appear to be preparing for minimal crowds – if any – in 2020.
Celebrity Access provided additional details regarding the credit agreement being extended:
The deal requires that Live Nation maintain $500 million of liquidity, up from $150 million from the previous amended agreement and will reset Live Nation’s consolidated net leverage ratio upon resumption of its application to 6.75:1.00 with the expectation of a gradual leverage drawdown over the next 3 years to 5.25:1.00.
The agreement also limits Live Nation’s ability to make certain investments and to add new debt, meaning that the promoter is unlikely to make additional acquisitions in the near future.
The full release issued by Live Nation is included below. The company is expected to issue its third quarter earnings this week.
LOS ANGELES, July 31, 2020 /PRNewswire/ — Live Nation Entertainment, Inc. (NYSE: LYV) (the “company”), today announced an amendment to its existing credit agreement, which gives the company increased flexibility in its debt covenants.
“This amendment provides us additional financial flexibility so that Live Nation is ready to unite fans and artists quickly when the time is right,” said Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment. “Given our strong liquidity position, we believe the change to a liquidity test allows the seamless operation of our business over the next year, by which time we expect concerts to be returning to scale.”
The amendment extends the time period during which Live Nation’s maintenance covenant will focus on liquidity metrics, continuing the substitution of the net leverage covenant with the liquidity covenant under its existing senior secured credit agreement. Under the terms of the agreement, the lenders have agreed to further suspend Live Nation’s net leverage covenant until December 31, 2021, unless the company elects to resume the net leverage covenant testing earlier. Previously, this suspension was due to last through September 30, 2020. In addition, the net leverage covenant test has been amended and increased on favorable terms.
Additional details on the terms of the amendment can be found on the company’s Form 8-K filed with the Securities and Exchange Commission.