S&P lowers SFX Entertainment

Standard & Poor’s said it lowered the corporate credit rating on SFX Entertainment Inc. to CC from CCC.

The outlook is negative.

The agency also said it lowered the rating on the company’s senior secured second-lien loan to CC from CCC. The 4 recovery rating is unchanged, indicating 30% to 50% expected default recovery.

The downgrades follow recent disclosure by the company of covenant breaches identified as events of default under its credit agreement, S&P said.

As a result, the company may face cross-default risk on its credit agreement if it fails to remedy those covenant defaults before the forbearance period expires Jan. 28, the agency said.

The forbearance agreement also disclosed that SFX has appointed a chief restructuring officer and the company may consider bankruptcy to facilitate the reorganization, S&P added.

The company’s liquidity and cash flow metrics will continue to significantly deteriorate and the agency said it expects a payment default to be a virtual certainty, regardless of the time to default.

A restructuring or bankruptcy could occur within the next six months, S&P said, and there is a high likelihood that SFX would miss the $15 million senior secured coupon payment due in February 2016 because of the liquidity crisis it is facing.

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