Vivid Seats ratings downgraded by Moody’s due to increased competition

Investing.com -- Moody’s Ratings has downgraded Hoya Midco, LLC’s (Vivid Seats) ratings, affecting approximately $493 million in rated debt. The downgrade includes the corporate family rating (CFR) to B2 from Ba3, the probability of default rating (PDR) to B2-PD from Ba3-PD, and the senior secured first lien bank credit facility (term loan due 2029 and revolver due 2027) to B2 from Ba3. Additionally, Vivid Seats’ speculative grade liquidity (SGL) rating was downgraded to SGL-3 from SGL-1. The rating outlook was changed to negative from stable on June 08, 2025.

The downgrade reflects Vivid Seats’ weaker than expected performance due to a sharp increase in competition. The increased marketing spend by competitors via third-party search engines has led to a significant decline in Vivid Seats’ volumes and a contraction in margin.

The negative outlook reflects Moody’s expectation for a significant decline in revenue, EBITDA and free cash flow in 2025 due to intense competition and uncertainty around the timing of a stabilization or recovery in operating performance. Vivid Seats withdrew its 2025 public guidance due to uncertain operating conditions.

The downgrade of the SGL rating reflects an expectation for weakening yet adequate liquidity over the next year. Vivid Seats is expected to generate negative free cash flow this year (around -$10 million), but its cash on hand ($199 million at the end of Q1 2025) will be sufficient to support its basic cash needs without needing to tap into a fully available $100 million revolver over the next 12 months.

Vivid Seats’ B2 CFR reflects its modest operating scale, concentrated focus in the ticket resale market and the stiff competition that has resulted in significant deterioration in credit metrics and liquidity year to date. The company’s reliance on third party search engines to direct traffic towards its platforms constrains profitability and exposes the company to factors outside of its control. Private equity firm GTCR holds a 36% ownership stake in the company’s shares through Hoya Topco, LLC and can influence the composition of the board of directors.

Vivid Seats had a track record of operating with low debt and significant cash balance since its SPAC merger in 2021. However, due to a sharp increase in competition intensity and in part due to acceleration of stock-based compensation plan, EBITDA declined significantly in recent quarters. This led Moody’s adjusted Debt/EBITDA to spike to 5.4x as of LTM March 2025, up from 4.2x at the end of 2024 and 2.5x at the end of 2023.

Vivid Seats’ term loan is covenant lite, and the revolver is subject to a springing maximum first lien net leverage ratio of 7x at 35% utilization. Moody’s does not expect the company to tap into the revolver over the next 12-18 months or the covenant to be tested.

The ratings could be upgraded if the ticket marketplace operating environment stabilizes and Vivid Seats returns to revenue and GOV growth and demonstrates meaningful progress toward delevering to 4x. Conversely, a downgrade could occur if organic revenue declines and negative free cash flow persist into 2026 or leverage sustained above 6x.

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