Live Nation’s credit rating improved by Moody’s; outlook stable

Investing.com -- Moody’s Ratings has elevated the corporate family rating (CFR) of Live Nation Entertainment (NYSE:LYV), Inc., a global entertainment company, to Ba2 from Ba3. The credit rating agency also upgraded Live Nation’s probability of default rating (PDR) to Ba2-PD from Ba3-PD. The senior secured bank credit facilities and senior secured notes ratings have been upgraded to Ba1 from Ba2, while the senior unsecured notes ratings have been raised to Ba3 from B1. However, Live Nation’s speculative grade liquidity rating remains at SGL-1. These revised ratings impact approximately $5.6 billion of Live Nation’s debt. The outlook for Live Nation has been revised to stable from positive.

According to Peter Adu, a Moody’s Ratings analyst, the upgrade is a recognition of Live Nation’s consistent strong operational performance, which is fueled by a high demand for live events. This demand allows the company to maintain good credit metrics.

Live Nation’s improved Ba2 CFR is due to several factors. The company has a large scale and strong market position, and its relationships with performing artists create substantial barriers to entry. Live Nation’s established platform for concert promotions and ticketing provides a sustainable and predictable cash flow. The company has seen a material improvement in its debt/EBITDA ratio post the COVID-19 pandemic, supported by EBITDA growth. Moody’s expects this ratio to remain below 4x through 2026, barring significant acquisitions. The company’s long-term growth prospects are good, especially in emerging markets where rising middle-class incomes will drive increased consumption of live events. Live Nation also has strong liquidity, boosted by positive free cash flow generation.

However, the rating is limited by certain factors. These include reputational and regulatory risks from periodic publicity and ongoing lawsuits, a business model tied to live events which are discretionary and subject to volatility, and governance risks stemming from its lack of a publicly articulated financial leverage target.

Live Nation’s debt consists of three classes: Ba1-rated senior secured credit facilities and senior secured notes; Ba3-rated senior unsecured notes; and unrated subordinated convertible notes. The Ba1 rating on the company’s secured debt reflects their preferential access to realization proceeds and loss absorption capacity.

The company has strong liquidity (SGL-1) through March 31, 2026, with sources approximating $4.1 billion, while the company has about $310 million of debt maturities and term loan amortization in this time frame. Liquidity sources include unrestricted cash of about $1.6 billion, full availability under its $1.3 billion revolving credit facility that expires in November 2029, full availability under its new $400 million venue expansion revolving credit facility that expires in November 2029, and free cash flow estimate of about $800 million over the next 12 months.

The outlook for Live Nation is stable because Moody’s expects the company to continue demonstrating good operating performance and maintaining strong liquidity while keeping debt/EBITDA below 4x through 2026.

The ratings could be upgraded if the company’s operating fundamentals continue to improve. However, the ratings could be downgraded if the company’s growth strategy were challenged, evidenced by material revenue or EBITDA declines or if it sustains debt/EBITDA above 4.5x and EBITA/Interest below 3.5x. Weak liquidity, possibly due to negative free cash flow generation on a consistent basis, could also cause a downgrade.

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