Live Nation Gets Credit Rating Downgrade at S&P Global

Michael Rapino - H - 2019

The research firm said postponed and canceled concerts due to the novel coronavirus risk "dramatic revenue declines" of between 65 percent and 80 percent.

Live Nation Entertainment has been hit with a credit rating downgrade from S&P Global Ratings.

The research firm on Wednesday reduced the concert promoter's rating to B+, from BB-, with a negative outlook, as it argued a prolonged postponement or cancellation of concerts and other events risked "dramatic revenue declines," which in turn would drive up Live Nation's debt load.

"We … believe there is substantial risk that delayed live music event scheduling and poor event attendance could cause credit metrics to remain weak with leverage above 6x and free operating cash flow to debt around 5 percent over the next two years," S&P Global analysts wrote in an investors note.

Live Nation, the parent company of Ticketmaster, in early March put virtually all concerts and sporting events around the world on hold in response to coronavirus shutdown orders as a safety precaution. The company has moved to bolster its liquidity amid the crisis, including opening a new $120 million revolving credit account, amending an existing credit agreement and significantly decreasing costs, including by reducing salaries.

And the government of Saudi Arabia's sovereign wealth fund acquired a 5.7 percent stake in Live Nation, valued at around $500 million. But S&P Global argues a longer stoppage of events for Live Nation will only compound its challenges.

"Currently, most of the company's events previously scheduled to happen over the next few months have been postponed and could be rescheduled to later dates in the second half of 2020 or into 2021, depending on when the pandemic risk lessens. Some music events have been canceled outright, although these cases remain a minority," the research firm said.

"As a result of these scheduling uncertainties and our expectation that social distancing restrictions will extend throughout the summer, the busiest season for live music events, we believe Live Nation revenues could decline by 65 percent to 80 percent in 2020 before rebounding significantly in 2021 as live events and attendance return," S&P Global noted.