Electronic music promoter and Beatport owner SFX Entertainment is not having a good time of it: as MBW revealed earlier this month, its market cap on the NYSE recently fell to less than 1/100th of rival Live Nation’s.
That valuation rebounded to the tune of $10m yesterday, with its share price climbing 31.98% to $0.62.
Why? Because SFX, run by controversial CEO Robert Sillerman, secured $60 million in new financing and refinanced its existing $30 million revolving credit facility.
The reason for the firm’s recent run of pain on the stock exchange comes down to the fact that Sillerman failed to take the company private in time for a mid-August deadline.
The exec was due to purchase the 62% of SFX he didn’t already own for $774m, but failed to come up with the funds.
Now the rebuilding begins, with expectations that a fire sale of assets is the only way SFX – or the remainder of SFX – would become affordable for Sillerman.
In a note to investors following the new financing, the company said that its ‘special committee and its advisors 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’.
“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 Robert F.X. Sillerman, the Company’s Chairman and Chief Executive Officer.
“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.”
The $60 million private placement financing consists of:
- The sale of $30 million in Senior Convertible Preferred Stock to an institutional investor. The Senior Convertible Preferred Stock is convertible into shares of the Company’s common stock at $1.75 per share and pays a 9 percent cash dividend; and,
- The sale of $30 million in Junior Preferred Stock to Sillerman Investment Partners III LLC, an entity controlled by Sillerman. This 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 additional $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.
Concurrently with the private placement, the Company entered into an agreement with GoldenTree Asset Management LP, an asset management company specializing in corporate and structured credit markets, whereby the Company’s existing lenders have assigned to GoldenTree their interest in the Company’s existing $30 million revolving credit facility.
Richard Rosenstein, Chief Financial Officer and Chief Administrative Officer of SFX, commented, “Together, these transactions immediately improve our financial position by providing us with additional operating and working capital. 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.”
SFX promotes a portfolio of live events that includes leading brands such as Tomorrowland, TomorrowWorld, Mysteryland, Sensation, Stereosonic, Electric Zoo, Disco Donnie Presents, Life in Color, Rock in Rio, Nature One, Mayday, Decibel, Q-Dance, Awakenings, and React Presents, as well as ticketing services Flavorus and Paylogic.Music Business Worldwide
