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Rating Action:

Moody's downgrades Live Nation's CFR to Ba3; outlook changed to negative

19 Mar 2020

Approximately $3.7 billion of debt rated

Toronto, March 19, 2020 -- Moody's Investors Service (Moody's) downgraded Live Nation Entertainment, Inc.'s (Live Nation) corporate family rating (CFR) to Ba3 from Ba2, probability of default rating to Ba3-PD from Ba2-PD, senior secured credit facilities ratings to Ba2 from Ba1, and senior unsecured notes ratings to B1 from Ba3, and changed the outlook to negative from stable. The speculative grade liquidity rating was maintained at SGL-1.

"The downgrade reflects expectations that the postponements or cancellations of live events associated with the spread of the coronavirus will materially weaken Live Nation's financial results and credit metrics in 2020", said Peter Adu, Moody's Vice President and Senior Analyst. "The negative outlook signals the potential for further rating changes if the coronavirus outbreak impacts demand for live entertainment in the busy summer months and onwards", Adu added.

Ratings Downgraded:

Corporate Family Rating, to Ba3 from Ba2

Probability of Default Rating, to Ba3-PD from Ba2-PD

$300M Senior Secured Revolving Credit Facility due 2024, to Ba2 (LGD2) from Ba1 (LGD2)

$100M Senior Secured Revolving Credit Facility due 2024, to Ba2 (LGD2) from Ba1 (LGD2)

$100M Senior Secured Multi Currency Revolving Credit Facility due 2024, to Ba2 (LGD2) from Ba1 (LGD2)

$400M Senior Secured Delayed Draw Term Loan A due 2024, to Ba2 (LGD2) from Ba1 (LGD2)

$950M Senior Secured Term Loan B due 2026, to Ba2 (LGD2) from Ba1 (LGD2)

$575M Senior Unsecured Notes due 2024, to B1 (LGD4) from Ba3 (LGD4)

$300M Senior Unsecured Notes due 2026, to B1 (LGD4) from Ba3 (LGD4)

$950M Senior Unsecured Notes due 2027, to B1 (LGD4) from Ba3 (LGD4)

Rating Unchanged:

Speculative Grade Liquidity Rating, SGL-1

Outlook Action:

Outlook, Changed to Negative from Stable

RATINGS RATIONALE

Live Nation's Ba3 CFR benefits from: (1) good market position, enhanced by established relationships with performing artists which create substantial entry barriers; (2) predictable cash flow due to its established platform for concert promotions and ticketing; (3) very good liquidity; and (4) good growth prospects especially in emerging markets, where there is growing consumption of live events as middle class incomes rise. The rating is constrained by: (1) potential significant negative impact of the coronavirus outbreak on its profitability; (2) a lack of publicly articulated capital structure target and risks that its acquisition growth strategy will elevate leverage periodically; (3) expectations that leverage will be sustained towards 5x (4.1x for 2019 pro forma for recent acquisitions and convertible notes issuance) through the next 12 to 18 months; and (4) event risks, such as new ticketing competitors and regulatory changes addressing the company's substantial market position or mandated consumer protection initiatives.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The live entertainment sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. Live Nation remains vulnerable to the outbreak continuing to spread. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on Live Nation of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.

Live Nation's social risk is elevated. The coronavirus is expected to materially impact operations in the live entertainment sector and in turn Live Nation's earnings, given the company's sensitivity to consumer discretionary incomes. The company will become more vulnerable if the outbreak continues to spread into the summer months. The company's market position attracts periodic adverse publicity related to both consumer protection and anti-competitive behavior. Some consumer protection issues arise from situations in which professional resellers use their competitive advantage to access large quantities of tickets, and individual consumers get priced out of the market. These lead to periodic calls for regulatory intervention and although the company has not been sanctioned, credit concerns exist.

Live Nation's governance risk is elevated. The company has a growth-by-acquisition strategy, which is not supported with a publicly disclosed leverage target. This creates uncertainty as to the extent to which leverage will rise with future acquisitions.

Live Nation has very good liquidity (SGL-1). Sources approximate $2.4 billion while it has $10 million of mandatory term loan repayments in the next 12 months. Liquidity is supported by cash of about $2 billion (including $400 million proceeds from recent convertible notes issue but net of $838 million in ticketing client cash), expected breakeven to positive free cash flow in the next 12 months, and $416 million of availability under its $500 million multi revolving credit facility that matures in October 2024 (none drawn but there is $84 million of letters of credit outstanding). The company's revolver is subject to a net leverage covenant and cushion is expected to exceed 30% through the next four quarters. Live Nation has limited ability to generate liquidity from asset sales.

The negative outlook reflects expectations that a further rating downgrade will occur if the impact of the spread of the coronavirus is more severe than now anticipated and significantly pressures demand for live entertainment beyond June 2020.

For an upgrade to be considered, the company must continue to demonstrate stable operating performance and maintain very good liquidity while sustaining Debt/EBITDA below 4x (pro forma 4.1x for 2019) and FCF/Debt above 10% (pro forma 4% for 2019). The ratings could be downgraded if business fundamentals weaken as a result of the coronavirus outbreak, evidenced by material revenue and EBITDA declines or if Debt/EBITDA is sustained above 5x (pro forma 4.1x for 2019) and FCF/Debt below 0% (pro forma 4% 2019). Weak liquidity, likely due to an expectation of negative free cash flow for a protracted period could also cause a downgrade.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Live Nation Entertainment, Inc., headquartered in Beverly Hills, California, operates a leading live entertainment ticketing and marketing company (Ticketmaster), and owns, operates and/or exclusively books venues and promotes live entertainment with operations in North America, Europe, Asia and South America. Revenue for the year ended December 31, 2019 was $11.5 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Adu, CFA
Vice President - Senior Analyst
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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