Viagogo has taken advantage of an incremental loan to increase its cash liquidity as it weathers the coronavirus pandemic storm. The company, which recently closed a $4 billion cash deal to purchase StubHub from eBay, announced a $330 million loan due February 2027.
According to analysis by Moody’s, the loan’s increase on the company’s leverage and loan balances doesn’t have any immediate negative impact on the company’s credit ratings. The increased cash on hand should, analysis says, allow the company to operate with little to no revenue for another two years.
“We expect a measured return to cash flow growth given a portion of live events in 2021 will represent postponed events for which tickets have already been sold, although incremental secondary ticket selling is likely to occur,” it says. “Given the time needed to ramp revenues in 2021 to approach historical levels, particularly as permitted attendance will be kept below venue capacity to allow social distancing and consumers remain cautious about large social gatherings, we believe revenues in 2021 will remain well below 2019 levels.”
The full analysis is available below:
Announcement: Moody’s says Viagogo’s new $330 million incremental term loan enhances liquidity; no immediate impact on B3 CFR
Global Credit Research – 24 Aug 2020
New York, August 24, 2020 — Moody’s Investors Service, (“Moody’s”) said PUG LLC (dba Viagogo) recently announced a new incremental term loan B in the amount of $330 million due February 2027. Net proceeds from the incremental term loan will be used to enhance liquidity adding to balance sheet cash. Although the additional debt elevates leverage and increases term loan balances to $2.5 billion, there is no immediate impact on the company’s B3 Corporate Family Rating (CFR) or negative outlook. We expect excess cash will remain on Viagogo’s balance sheet to ensure liquidity is available to manage operations through the pandemic and will not be used to fund distributions or acquisitions.
Despite Viagogo’s asset-lite business model, revenues remain dependent on the timing and number of live events globally as well as attendance levels which are expected to remain below historical venue capacity based on social distancing mandates and consumer sentiment. Viagogo’s credit profile continues to be pressured by cancellations and postponement of live events globally. We project Viagogo’s secondary ticket sales revenue will remain well below 2019 levels over the next several months followed by a gradual recovery around mid-2021; however, there are further downside risks in the event demand for live events remains depressed beyond mid-2021 in a scenario in which COVID-19 is not contained.
Viagogo’s B3 CFR incorporates good liquidity, supported primarily by significant cash balances exceeding $700 million pro forma for the incremental term loan B. Given a reduced monthly burn rate, cash balances provide Viagogo the ability to operate with only nominal amounts of revenue for two years. Our base case projections include revenues growing gradually by mid-2021 as a greater number of live events get scheduled across the globe next year. Tickets sales occur a few months in advance of events which typically generates cash inflows and positive working capital.
We expect a measured return to cash flow growth given a portion of live events in 2021 will represent postponed events for which tickets have already been sold, although incremental secondary ticket selling is likely to occur. Given the time needed to ramp revenues in 2021 to approach historical levels, particularly as permitted attendance will be kept below venue capacity to allow social distancing and consumers remain cautious about large social gatherings, we believe revenues in 2021 will remain well below 2019 levels.
Viagogo’s good liquidity is supported by more than $700 million of unrestricted cash balances pro forma for the new incremental term loan B, working capital inflows from upfront cash receipts in advance of reimbursements to ticket sellers, minimal capital expenditures, and 35% availability under the $125 million revolving credit facility due 2025. Given the springing covenant in the revolver, we assume the remaining portion of the revolver will be unavailable over the next few quarters. Payments due to ticket sellers totaling $170 million is expected to be stable through 1Q2021, with the roll-off of historical payments due to sellers expected to be largely offset by cash inflows from new receipts. The company indicates that remaining severance and other restructuring costs are not significant.
Viagogo provides an online marketplace for secondary tickets along with payment support, logistics, and customer service. With the acquisition of StubHub, the combined company is a leading ticket marketplace globally. Viagogo is majority owned by Madrone Capital Partners, Bessemer Venture Partners, and Eric Baker, CEO and founder, with Mr. Baker holding majority voting control.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.