Moody’s Downgrades SFX

In addition to the corporate downgrade of two notches to Caaa3 from Caa1, Moody’s knocked SFXE’s second lien senior secured notes from Caa1 to Caa3, and its first lien senior secured revolving credit facility from B1 to B2.

The company’s speculative grade liquidity rating was lowered from SGL-3 (adequate) to SGL-4 (weak). Moody’s also revised SFX’s probability of default rating to Caa3-PD from Caa1-PD. Moody’s believes “the company will require external funding and may be unable to obtain it,” according to its rating action announcement. “With negative EBITDA and no tangible signs of operations becoming cash flow positive, and with a limited and depleting cash balance, Moody’s thinks that the company requires additional financing. It is not clear that alternative funding is available.”

The previous day, SFX notified the Securities and Exchange Commission of amendments to employment agreements that eliminate performance-based bonuses for two execs: Beatport President/CEO Gregory Consiglio and SFX Executive VP of Global Brand Partnerships Kevin Arrix. SFX is eliminating Consiglio’s annual target bonus of $400,000 and instead provides for a base salary of $300,000 and an annual bonus of $150,000. Arrix loses a performance-based target bonus of $500,000 as well as an equity bonus of up to 150,000 shares of common stock, but also retains a base salary of $300,000.

Despite a rollercoaster week on Wall Street, SFXE shares traded around the 90 cents per at press time, after dropping to an all-time low of 63 cents. If it remains under $1 per share for 30 days, SFXE risks being delisted by Nasdaq.