SFX Gets Surprise Bailout

SFX Entertainment, seemingly on the brink of bankruptcy with a mountain of debt and two class action suits filed against it by investors, secured $60 million in new financing and refinanced its existing $30 million revolving credit facility, according to a surprise Sept. 17 announcement.

Photo: NASDAQ.com
Afrojack (center) is flanked by SFX Entertainment board members Shelly Finkel (L), Robert Sillerman and Mitch Slater (R) to ring the closing bell on the NASDAQ stock market in celebration of its Oct. 9 initial public offering.

The $90 million total comes from both new and existing investors, according to a statement.

“This round of financing from these sophisticated investors reflects a level of confidence and provides growth capital to support many of the exciting new initiatives SFX is undertaking,” said SFX chief exec Robert Sillerman. “While the Company continues to explore strategic alternatives, this solidifies SFX for the short and long term, so we can focus on producing great festivals and events and operating globally recognized digital properties.”

SFX’s “special committee” of directors advising on the sale of the company “continue to accept proposals for the entire company, as well as assets not central to its core business, with a deadline of October 2, 2015.”

The financing was raised through the sale of $30 million in Senior Convertible Preferred Stock to an institutional investor, which is convertible into SFX common stock at $1.75 per share and pays a 9 percent cash dividend.

The company also sold $30 million in Junior Preferred Stock to Sillerman Investment Partners, a holding company controlled by Sillerman. The transaction “is comprised of a completed purchase of $15 million of the Junior Preferred Stock and a fully-committed obligation by Sillerman Investment Partners to purchase an addition $15 million over the next 30 days.”

The Junior Preferred Stock pays dividends in kind at 29.5 percent for two years and will pay a 9 percent cash dividend afterwards, according to the announcement.

SFX also made an agreement with GoldenTree Asset Management LP in which the company’s existing lenders assigned to GoldenTree their interest in the SFX’s existing $30 million revolving credit facility.

“Together, these transactions immediately improve our financial position by providing us with additional operating and working capital,” SFX CFO Richard Rosenstein said. “We value these investors’ confidence in our business and equally appreciate the commitment made by GoldenTree through the assumption of our revolving credit facility.

“With the success of many of our festivals in the current quarter and this added financial flexibility, SFX is better positioned to continue growing our powerful brands and support our extraordinary team members who are focused on executing on our strategic plans. This also eliminates all operating distractions as we explore proposals from interested strategic partners.”

Among the “distractions” were two major rating downgrades, a plummeting share price that threatened a Nasdaq delisting, two class-action lawsuits, festival vendors putting SFX accounts on a “cash only” basis, all after a “go private” attempt by Sillerman to buy SFX shares he didn’t already own failed in August..

SFX share price jumped with the news, spiking some 30 percent from 45 cents per share to more than 60 cents at press time.