LIVE NATION MAKES MOVES TO WEATHER COVID-19 STORM

Live Nation has added $120m to its existing credit agreement, instituted a cost reduction program targeting $500m in savings this year and spelled out the effect of COVID-19 on its concert business and upcoming quarterly report.

The company has implemented salary reductions, with salaries for senior executives reduced by up to 50%. CEO/President Michael Rapino is forgoing his salary for the duration of the salary reduction program.

The company has instituted hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending.

Through 3/31, Live Nation has had 8,000 shows affected by the event stoppage; those shows account for more than 15m tickets sold.

Of those, 7,000 shows—with nearly14m tickets sold—were postponed, accounting for 90% of tickets impacted. Canceled shows have resulted in refunds being issued for 1.6m tickets.

The company expects to allow some refunds for postponed shows in the U.S. and select international markets as new event dates are set.

In the past, requests for refunds at rescheduled shows are between 5% and 20% of the tickets sold. Based on that, as well as an analysis of scenarios where refund rates increase above 20%, the company does not expect material declines in its event-related deferred revenue balances given the geographic diversity of the funds, the large portion of funds held by venues, and ongoing ticket sales for events in late 2020 and 2021.

The amendment to the credit agreement will alter the math used to calculate how much Live Nation owes on its debt. Live Nation’s net leverage covenant for the second and third quarters of 2020 will be suspended. Beginning with the fourth quarter of 2020, through the second quarter of 2021, the net leverage covenant will be calculated by substituting consolidated EBITDA, as defined in the credit agreement, from the second and third quarters of 2020 with consolidated EBITDA from the second and third quarters of 2019.

“The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand,” Rapino said. “With this additional liquidity, the flexibility in our debt covenants, and cost-cutting efforts, we believe that Live Nation has the financial strength to weather this difficult time. We will be ready to ramp back up quickly and once again connect audiences to artists at the concerts they are looking forward to.”

As a result of the stop in show activity in mid-March, the company’s first quarter 2020 operating loss is expected to widen vs. the prior year and adjusted operating income is expected to drop from being in line with 2019’s first quarter results to a small loss for the quarter. Revenue for the quarter is expected to be down approximately 20%.

The company is making full use of government support programs in the U.K., most European and Asian countries. Live Nation also expects to receive payroll support under the Employee Retention Credit for employers program established as part of the 2020 CARES Act.