Live Nation Execs Take Pay Cuts, Company Boosts Liquidity As 8,000 Shows Impacted By COVID-19 Stoppage

Live Nation executives are taking pay cuts or deferring salary altogether as part of a cost reduction and cash management program from the company, which today also announced moves to boost liquidity including a new revolving credit facility that President and CEO Michael Rapino says will help the company ride out the economic trials brought on by the coronavirus pandemic.

“The live entertainment industry has delivered incredible global growth for over 20 years, which speaks to the great passion and resilience of fan demand,” Rapino said in a release dated April 13. “With this additional liquidity, the flexibility in our debt covenants, and cost-cutting efforts, we believe that Live Nation has the financial strength to weather this difficult time. We will be ready to ramp back up quickly and once again connect audiences to artists at the concerts they are looking forward to.”
A press release following an April 9 8K filing outlining the amended credit agreement also notes that 8,000 shows were impacted by the COVID-19 event stoppage, with 15 million tickets sold for those shows.  The company says that for 14 million tickets, the shows were postponed rather than canceled, accounting for 90% of tickets impacted.  Live Nation notes that refunds have been issued for all canceled shows, while “the company expects to allow some refunds for postponed shows in the U.S. and select international markets as new event dates are set.” The company has updated its outlook for first quarter 2020, saying that revenue for the quarter is now expected to be down approximately 20%.
“In light of the evolving circumstances relating to the coronavirus,” the company, in the 8K filing, outlined base salary cuts from named executive officers including Rapino (base salary reduced from $3 million to $0), President Joe Berchtold ($1.3 million to $650,000), Chief Accounting Officer Brian Capo ($363,500 to $272,625) General Counsel Michael Rowles ($800,000 to $400,000) and Chief Financial Officer Kathy Willard ($950,00 to $475,000). Additional cost reduction efforts include hiring freezes, reduction in the use of contractors, rent re-negotiations, furloughs, and reduction or elimination of other discretionary spending, including, among other things, travel and entertainment, repairs and maintenance, and marketing, according to the company statement, which adds Live Nation is making full use of government relief in Europe, Asia and Australia and in the U.S. expects to receive payroll support from the Employee Retention Credit for employers program established as part of the 2020 CARES Act.
“The company believes this aggressive cost and cash management program, combined with a strong liquidity profile, positions Live Nation to manage through the COVID-19 related hold on show activity and provides the flexibility to scale-up quickly when shows restart,” the statement continues.
The new incremental revolving credit facility of $120 million extends Live Nation’s undrawn debt capacity, putting the company’s available debt capacity at approximately $940 million. The new credit facility can be increased to $150 million “if additional commitments are received on or before May 9, 2020.”  The agreement is designed to, among other things, suspend Live Nation’s net leverage covenant under its existing senior secured credit agreement for the second and third quarters of 2020.  
“Commencing with the fourth quarter of 2020, through the second quarter of 2021, the net leverage covenant will be calculated by substituting consolidated EBITDA, as defined in the credit agreement, from the second and third quarters of 2020 with consolidated EBITDA from the second and third quarters of 2019. As a result, this amendment will eliminate the use of consolidated EBITDA from the second and third quarters of 2020 in any net leverage covenant test, allowing the company the flexibility to manage its business through the disruption it will experience in 2020,” a Live Nation statement explains.
With the accompanying press release, Live Nation says its total cash and cash equivalents balance is $3.3 billion, including $914 million free cash and $2.0 billion of event-related deferred revenue. 
“While event-related deferred revenue balances fluctuate over the course of the year, given the timing of shows in 2020 and expected substantial volume of on-sales for 2021 shows in the second half of this year, the company expects this number to remain above seasonally normal levels throughout this year,” the company states, adding that half the affected shows are upcoming in the U.S. and the other half international. 
“In the U.S., the funds are largely associated with shows in the company’s owned or operated venues, notably amphitheaters, festivals, theaters and clubs,” the statement continues, noting that it does not “otherwise generally hold” funds for concerts taking place in third-party venues.  “Internationally, the funds held are from a combination of both shows in owned or operated venues, as well as shows in third-party venues associated with the company’s promoter share of tickets in allocation markets.”
Live Nation stock had taken a beating in recent months but on Monday’s market opening was at $37 per share, substantially up from its 52-week low of $21.70 in mid-March. The company had been as high as $76.60 in February, with a market capitalization around $15 billion, to today’s $8 billion.  The coronavirus pandemic has led to layoffs, pay cuts or relief funds being set up at the major talent agencies as well, which rely on client appearances for revenue. Meanwhile, ticketing platform Eventbrite laid off 45% of its workforce, with sources close to the situation telling Pollstar the cuts are largely to the company’s music department.