Standard & Poor’s Rating Services on Tuesday lowered the corporate credit rating on Ticketmaster Entertainment Inc. one level further into junk status because of its weak fourth-quarter performance.
The ratings agency had put Ticketmaster on CreditWatch with a view to downgrade last month after it announced it planned an all-stock merger with concert promoter Live Nation Inc.
It cut the company’s rating to BB from BB+ and kept it on CreditWatch with negative implications.
Live Nation’s corporate credit rating, already three notches lower at B, was unchanged but remained on CreditWatch with a view to an upgrade.
As of Dec. 31, Ticketmaster had total debt of $865 million and Live Nation had total debt of $886 million.
“The downgrade reflects Ticketmaster’s weak fourth-quarter operating performance and rising debt leverage,” said Standard & Poor’s credit analyst Hal Diamond.
He added that growth in the ticket resale business will not likely be able to overcome a decline in primary ticket sales volume because of the recession.
He also warned that Ticketmaster may pull back from the secondary ticketing market, which has gotten it into hot water on concerts from Bruce Springsteen to Michael Jackson, “which would increase its dependence on the mature and cyclical primary ticket market.”
Ticketmaster lost $1.07 billion in the fourth quarter, mostly due to a huge impairment charge to account for its falling share price.
Excluding charges, earnings fell 81 percent to $9.9 million, or 16 cents per share. Revenue grew 9 percent to $384 million, mainly due to acquisitions.
Analysts surveyed by Thomson Reuters had expected, on average, earnings of 29 cents per share on revenue of $378 million. Analyst estimates exclude one-time charges.
Shares in Ticketmaster rose a penny to close at $4 on Tuesday, while Live Nation shares fell 7 cents, or 2.4 percent, to $2.88.