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

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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.”

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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).

7 Responses

  1. Emusicpromo

    It was only a matter of time for this, in a genre and market that gives tracks away free on Soundcloud.
    Soundcloud is next, it has to happen or the devalued music industry cannot survive.

    Reply
    • Remi Swierczek

      I agree, market will sort to oblivion most of music stupidity, including Spotify.
      The biggest problem is cash drunk, money losing, YouTube.

      Era of free and near free music will end only with cooperation and participation of Google.

      Lucian Grainge should stop his Grammy’s preperations and call Larry Page.

      Reply
  2. mack the knife

    Good riddance. This is what happens when your product is lite to put it politely, and you hype it out of all proportion. Electronic music remains creatively vital and healthy where the music remains the focus of everyone’s attention.. especially the artists.

    Reply
  3. Question

    If he is taking the company private then this doesn’t even matter. He’s got plenty of money and can always get more. Either he’s already made the deal to go private and now is just waiting for it to go through, or on the other hand, he has helped to lower the stock price so he can buy the company back for much less money.

    Maybe I’m completely off base but either way, it would be nice if the article addressed some aspect of this.

    Reply
    • SFX can suck it

      He was told to show he has the money to buy back and hasn’t done that so it hasn’t happened and there’s serious doubts that he can pull it off.

      Reply
  4. Alabama Pipeline LX

    Lots of business models sound genius and durable but do to the very tricky nature of the ever changing music landscape circumstances just don’t hold up. Now you take for instance the ,’ Invisible Poet Literati ‘ now the schematic structure of that sole proprietorship endeavor registered and surpassed one trillion USD in collected cash withe the department of justice driving the getaway trucks. . .: Your friendly neighborhood poet , Literati X

    Reply

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