Lenders last week approved Live Nation Entertainment’s loan-amendment package that delays step-downs in its credit facility’s total-leverage covenant and allows for up to $100 million of non-recurring add-backs to EBITDA, sources said.
The deal was approved after J.P. Morgan added a step to the pricing grid that can take pricing up by 25 bps if leverage increases over 4x, sources said. Lenders received a 25 bps fee, and pricing won’t increase now.
Live Nation in May 2010 placed the $800 million B term loan via J.P. Morgan, Goldman Sachs and Deutsche Bank, which was issued at 99.5 and is priced at L+300, with a 1.5% LIBOR floor. As revised, the grid takes the spread to L+325 if leverage is greater than 4x. The spread can fall to L+275 if leverage is less than 2.75x.
The B loan was issued alongside a $100 million TLA and a $300 million revolving credit. At March 31, 2012, the outstanding balance across both term loans, net of discount, was $866.2 million, and there were no drawings under the RC. The TLA grid will now step to L+325 for greater than 4x leverage; it’s currently at L+300, with no floor based on leverage greater than 3x and falls to L+275 for greater than 2.5x; L+250 for 2x, L+225 for 1.5x, and L+200 for less than 1.5x.
The loan is currently governed by a 4.5x total-leverage test, which is set to tighten to 4x on Sept. 30. As amended, the leverage covenant will remain at 4.5x through year end 2013. The covenant will step to 4.25x when it’s tested on March 31, 2014, to 4x at March 31, 2015, and finally to 3.75x at March 31, 2016.
By contrast, the pre-amendment covenant stepped as low as 3.5x, sources noted.
In addition, the amendment allows for $100 million of cumulative one-time add-backs through the life of the deal, with the amount capped at 15% of EBITDA for any single year, sources said.
Live Nation is currently leveraged around 3.8x, putting it tight to the post-step-down level in the current agreement, and the company is facing an arbitration issue that could potentially push it out of compliance the deal tightens to 4x, sources explained.
Proceeds from the loans and a $250 million issue of 8.125% notes due 2018 were used to refinance the debt of Live Nation and Ticketmaster following their early 2010 merger. Corporate ratings are B+/B1. – Chris Donnelly/Kerry Kantin