On August 26, 2015, Moody’s Investors Service downgraded SFX Entertainment, Inc.’s corporate family rating two notches to Caa3 from Caa1, its Second Lien Senior Secured Notes were downgraded to Caa3 from Caa1 and the Company’s First Lien Senior Secured Revolving Credit Facility was downgraded to B2 from B1. According to Moody’s, SFX’s Caa3 corporate family rating stems primarily from Moody’s view that the Company will require external funding and may be unable to obtain it. 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.
On August 27, 2015, Standard & Poor’s Ratings Services lowered its corporate credit rating on SFX Entertainment, Inc. to CCC from B- and its senior secured second-lien loan to CCC from B-. “SFX’s liquidity and cash flow metrics remain the primary risk factors for the current rating, in our view,” said Standard & Poor’s credit analyst Naveen Sarma. According to Standard & Poor’s, the downgrade reflects the significant deterioration of SFX’s financial flexibility and liquidity position following the recent cancellation of its announced “going private” transaction, S&P’s expectation that the Company will generate negative as-reported EBITDA and free operating cash flow (FOCF)in 2015, and the subpar performance of its Beatport platform. Read more on distressed companies.