Live Nation Announces Credit Agreement Amendment, Additional Revolving Credit Facility And Cost Reduction Program

Live Nation Entertainment, Inc. today announced an amendment to its existing credit agreement, the completion of a new revolving credit facility and a cost reduction and cash management program.

"The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand," said Michael Rapino, President and Chief Executive Officer of Live Nation Entertainment. "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."

Credit Agreement Amended

The amendment will, among other things, suspend Live Nation's net leverage covenant under its existing senior secured credit agreement for the second and third quarters of 2020. Commencing 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. As a result, this amendment will eliminate the use of consolidated EBITDA from the second and third quarters of 2020 in any net leverage covenant test, allowing the company the flexibility to manage its business through the disruption it will experience in 2020.

New Revolving Credit Facility

A new incremental revolving credit facility of $120 million has been established, extending Live Nation's undrawn debt capacity. Following this increase, Live Nation has approximately $940 million in available debt capacity, including $400 million in undrawn term loan A capacity and $540 million in available revolver capacity.

As of February 29, 2020, Live Nation's total cash and cash equivalents balance was $3.3 billion, which included $914 million of free cash and $2.0 billion of event-related deferred revenue. This free cash and event-related deferred revenue, together with the now available debt capacity of $940 million, gives the company a total liquidity position of $3.8 billion. While event-related deferred revenue balances fluctuate over the course of the year, given the timing of shows in 2020 and expected substantial volume of on-sales for 2021 shows in the second half of this year, the company expects this number to remain above seasonally normal levels throughout this year.

Event-related deferred revenue consists of cash held by Live Nation Concerts for its shows, with roughly half the funds associated with upcoming shows in the U.S. and half for international shows. In the U.S., the funds are largely associated with shows in the company's owned or operated venues, notably amphitheaters, festivals, theaters and clubs. Internationally, the funds held are from a combination of both shows in owned or operated venues, as well as shows in third-party venues associated with the company's promoter share of tickets in allocation markets.

Live Nation does not otherwise generally hold funds for concerts being held in third-party buildings. In the U.S., venues traditionally hold all funds, and internationally either the venue holds all funds or holds the portion of funds associated with their ticket allocation.

Affected Shows Largely Postponed Not Canceled

As of March 31st, Live Nation has sold over 45 million tickets to shows scheduled for 2020, down 2% from the same time last year. These ticket sales do not include 1.6 million tickets for canceled shows and 1.5 million tickets for shows rescheduled into 2021.

Through March 31st, Live Nation has had eight thousand shows impacted by the event stoppage starting in mid-March of this year, with 15 million tickets sold for these shows. Of this, seven thousand shows with 14 million tickets sold were postponed, accounting for 90% of tickets impacted. The remaining 10% of tickets, or 1.6 million, were for shows that were canceled.

Refunds have been issued for tickets for all canceled shows, and 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 multiple international markets, including Germany, Italy and Belgium, government regulations which allow for the issuance of vouchers in place of cash refunds for rescheduled shows, and in some cases for cancelled shows, have been put in place or drafted.

For rescheduled shows that have offered refunds over the past month, 5% to 20% of fans have requested refunds while the vast majority preferred to hold on to their tickets for the future date. Based on these trends, 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.

Cost and Cash Management Programs

Following record pacing of ticket sales through early March of this year, Live Nation ceased all concerts activity by mid-March. As a result of the stop in show activity, the company's first quarter 2020 operating loss is expected to widen versus prior year and adjusted operating income ("AOI") is expected to drop from being in-line with 2019's strong first quarter results to a small loss for the quarter, while revenue for the quarter is expected to be down approximately 20%.

Given the uncertainty associated with the duration of current conditions globally, the company has launched a number of initiatives to reduce fixed costs and conserve cash. As part of these cost reduction efforts, the company will implement salary reductions, with salaries for senior executives reduced by up to 50%, and the company's CEO voluntarily forgoing 100% of his salary for the duration of the salary reduction program. Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing.

The company is also making full use of government support programs globally. In most European and Asian markets, including the U.K., Germany, Italy, France, Spain and Australia, there are robust payroll support programs to mitigate a substantial portion of employee costs. Additionally, in the U.S., Live Nation expects to receive payroll support under the Employee Retention Credit for employers program established as part of the 2020 CARES Act.

The company is further protecting its cash outflows by reducing advances in both its ticketing and concert businesses, re-assessing all capital expenditure projects and evaluating all other cash deployment activities. As a result of these initiatives and government support programs, the company is targeting $500 million in cost reductions in 2020 and the elimination or deferral into 2021 of $800 million in cash outflows. The company believes this aggressive cost and cash management program, combined with a strong liquidity profile, positions Live Nation to manage through the COVID-19 related hold on show activity and provides the flexibility to scale-up quickly when shows restart.

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