Legends Hospitality is looking to raise up to $ 500 million in credit facility and notes to help the business wait for the severe disruption of live events caused by COVID-19.
Just days after making a deal for investment firm Sixth Street to take majority control of the firm, co-founded by the New York Yankees and Dallas Cowboys, Legends wants to sell $ 350 million in guaranteed tickets senior – a type of debt – and create a $ 150 million revolving credit facility, a line of credit that it may or may not access, according to a rating released by Fitch Ratings.
A sign of the potential business turmoil Legends face, Fitch’s rating is a first-time issuer default rating, or IDR, on Legends business. An IDR rating is a situation where Fitch reflects on the possibility that an issuer could default on its long-term debt. Legends’ IDR rating of B-minus means there is a significant risk of default, but the company is meeting its financial obligations on time.
“While this has been a tough year for the sports and live entertainment industry, we have passed the test and are now positioned for stronger and even more resilient growth with our unmatched 360-degree platform for planning, sales, partnerships, hospitality, merchandise, and technology solutions, ”said Shervin Mirhashemi, president and CEO of Legends, in an email.
Rating agencies like Fitch publish analyzes and rankings of corporate debt issuers to help institutional investors assess the generally remote risk of losing their investment. For this reason, ratings also influence how much a company like Legends will have to offer in interest payments to sell its debt to investors.
“Legends has faced serious disruption to its operations due to COVID-19,” Fitch said in his rating note. “Venue capacity restrictions and event cancellations resulted in significant FCFs [free cash flow] burn which forced the company to seek an injection of liquidity. Fitch does not expect live event attendance to return to normal until 2022, when it assumes event attendance will be 90% of 2019 levels.
With the current value of $ 500 million in proposed funding deals, Legends would have a total debt of $ 625 million: a revolving credit facility of $ 150 million over four years, $ 350 million in senior secured notes. rank over five years and an unsecured payment of $ 125 million over six years. loan in kind. Almost all of Legends’ domestic assets will secure the first two forms of debt. For this reason, the proposed credit facility has a higher BB-minus rating from Fitch, and the $ 350 million tranche has a B rating. In addition to its debt financing, Legends ended 2020 with $ 91 million of available cash.
Despite the inconvenience surrounding Legends at the moment, Fitch sees strengths in the business that should allow him to weather the pandemic. “While Legends competes with several bigger, better capitalized [sic] companies in its core hotel segment, including Aramark, Compass Group and Sodexo, it is often a leader in its other segments, ”the agency notes. “Of the company’s over 200 customers at the end of 2019, less than 21% were using more than one of Legends’ services, providing a significant opportunity to grow within its existing customer base,” added Fitch. , noting that only 1% of Legends’ activity is outside. North America, providing many additional areas for business expansion.
As Sportico According to an initial report on Monday, Legends will now be majority owned by investment firm Sixth Street, with founding partners of the New York Yankees and Dallas Cowboys each holding minority positions of equal size. Another undisclosed investor owns about 9% of the company. The Sixth Street investment valued Legends at $ 1.35 billion.
(This story has been updated with a quote from Legends President and CEO Shervin Mirhashemi in the fourth paragraph.)
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