CAA Gets Credit Rating Downgrade at S&P Global

Bryan Lourd CAA Getty - H 2016
Michael Kovac/Getty Images for Vanity Fair

The firm contends that fallout from the pandemic will hit the agency's revenues in the wake of live events and Hollywood film and TV production being shut down.

CAA Holdings LLC, led by CEO Bryan Lourd, has been hit with a credit rating downgrade from S&P Global Ratings.

The research firm on Monday reduced Creative Artists Agency's rating to B, from B+, with a stable outlook, as it argued the Hollywood agency's talent roster has been impacted by the major studios pausing virtually all film and TV production amid the coronavirus pandemic, or due to the cancellation or postponement of multiple live events, including sports, music concerts and festivals.

"The majority of CAA's represented talent are being directly affected by these disruptions because they are not receiving compensation. This, in turn, prevents CAA from collecting its agent commissions, which leads us to anticipate that its credit metrics will be materially weaker than we previously expected in fiscal year 2020," S&P Global analysts wrote in a report.

The result will "materially affect" CAA's earnings and debt ratios for fiscal 2020. CAA earlier became the latest Hollywood agency to impose pay cuts to weather the coronavirus pandemic.

Rival agencies like WME, UTA, ICM Partners and Paradigm have also seen their revenues dry up as consumers shelter in their home and live events and film and TV production shut down due to quarantine orders.

S&P Global put CAA on a stable outlook as it assumes the Hollywood agency has sufficient liquidity to service its debt load over the next year.

"We could lower our rating on CAA if the resumption of TV, film, and live event production is materially slower than we currently expect, leading to a sustained slowdown in the company's revenue and earnings well into fiscal year 2021," the research firm added.