SFX Entertainment Is Trading Below $1, Suffering Multiple Downgrades, In Debt, and Running Out of Cash

Billboard Cover, September, 2012.  “I know nothing about EDM,” Robert F.X. Sillerman explained.

The monstrous implosion of SFX Entertainment continues this week, with shares of SFXE struggling below $1 and multiple advisory firms downgrading the stock.  The latest pummeling comes from Moody’s Investor Service, which pilloried the EDM-focused company with multiple, near-ruinous downgrades.

That includes a shift into seriously-negative ‘Caa3,’ a double-step down from ‘Caa1,’ and basically translates into ‘quite crappy’ for the non-financial layman.  But that was just one of several seriously-negative downgrades from Moody’s, whose dour review places roughly $325 million in debt into even more trouble.  “At the same time, ratings for SFXE’s Second Lien Senior Secured Notes were downgraded to Caa3 from Caa1, the company’s First Lien Senior Secured Revolving Credit Facility was downgraded to B2 from B1, and the company’s speculative grade liquidity rating was lowered to SGL-4 (weak) from SGL-3 (adequate),” the respected reviewer explained.

“It is not clear that alternative funding is available.”

In other words, if you’re not out of SFXE, please run, do not walk, to the nearest exit.  The splashy idea, concocted by Robert F.X. Sillerman, is now on fire.  “SFX’s Caa3 corporate family rating (CFR) stems primarily from Moody’s view that the company will require external funding and may be unable to obtain it,” the review continued.

“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.”

Meanwhile, shares of SFXE are struggling beneath $1, troubled waters that can ultimately flow towards a delisting.  The troubled picture has also impacted artists from SFX-owned Beatport, whose royalty checks were abruptly delayed (though major label payouts were somehow mailed on time).

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Source: Industry News