CAA raised $75 million in debt earlier this week in an effort to make sure it has loads of liquidity available in an unsure enterprise local weather.
The transfer prompted CAA to earn a credit standing downgrade from S&P International Rankings and Moody’s Investor Service because it raised CAA’s debt ratio to above the eight occasions earnings stage. The scores companies cited the widespread coronavirus-related shutdowns which have up-ended the leisure enterprise and briefly shut off earnings streams for a lot of of CAA’s starry purchasers.
“The reside leisure trade sector has been one of many sectors most importantly affected by the shock given its sensitivity to shopper demand and sentiment. Extra particularly, the weaknesses in CAA’s credit score profile have left it weak to shifts in market sentiment in these unprecedented working circumstances and CAA stays weak to the outbreak persevering with to unfold,” Moody’s wrote on Monday.
In accordance with the companies, CAA has $1.15 billion in debt coming due in 2026 and a $125 million revolving credit score facility due in 2024.
Moody’s downgrade to B3, from B2 stage with an outlook of secure, “displays the influence of the coronavirus outbreak on the flexibility to carry reside occasions and full media manufacturing as scheduled, in addition to the general financial system which can result in decrease discretionary shopper spending. Whereas many occasions could also be rescheduled later within the 12 months relying on the period of the outbreak, others could also be held with out followers in attendance or cancelled.”
Moody’s famous that CAA’s music division represents a “modest” portion of the company’s complete income.
S&P International dropped CAA to B from B plus, additionally with an outlook of secure.
“Nearly all of CAA’s represented expertise are being instantly affected by these disruptions as a result of they aren’t receiving compensation. This, in flip, prevents CAA from gathering its agent commissions, which leads us to anticipate that its credit score metrics will likely be materially weaker than we beforehand anticipated in fiscal 12 months 2020,” S&P International wrote. “The outlook additionally displays our view that quantity of productions and reside occasions, together with sports activities and music, will regularly return to pre-pandemic ranges towards the top of fiscal 12 months 2020 into 2021, which can additional enhance the corporate’s credit score measures over the following 12 months.”
S&P stated it will think about an improve for CAA if the company returns to a 5 occasions earnings leverage ratio.