The technical writing on the Moody’s financial ticker-tape jargon reads:
..Issuer: PUG LLC (Viagogo)
.... Corporate Family Rating, Downgraded to B3 from B2
.... Probability of Default Rating, Downgraded to B3-PD from B2-PD
....Senior Secured 1st lien Bank Credit Facility (USD), Downgraded to B3 (LGD4) from B2 (LGD4)
....Senior Secured 1st lien Bank Credit Facility (Euro), Downgraded to B3 (LGD4) from B2 (LGD4)
For the full report, behind the Moody’s paywall, click here.
PUG LLC is the corporate entity behind Viagogo which completed the purchase of StubHub in February for an all-cash deal of USD4.05 billion. To reach that number, PUG LLC (Viagogo) took on around USD2 billion in debt and The DAIMANI Journal revealed earlier this year those titans of the US business community who are holding that debt.
A rosy as the deal may have looked at the end of last year and the first months of this year, it looked like a positive shocker in March with the arrival of the coronavirus and Live Event lockdown. So shocking that the business Bible Forbes had no issue pronouncing it the worst deal ever.
That was the end of May.
Now the analysts at Moody’s have cast their eyes over what they see now and in the future, and this is their assessment [with DAIMANI highlights]:
"Despite Viagogo's asset-lite business model, revenues remain dependent on the timing and number of live events globally as well as attendance at venues which is expected to remain below historical capacity based on social distancing mandates and consumer sentiment. Accordingly, debt ratings continue to be pressured by cancellations and postponement of live events globally (e.g. sports, concerts, and theater). Moody's projects Viagogo's secondary ticket sales revenue will remain well below 2019 levels over the next several months followed by a gradual recovery around mid-2021; however, there are further downside risks in the event demand for live events remains depressed beyond mid-2021 in a scenario in which COVID-19 is not contained.
"The rapid spread of the coronavirus outbreak, deteriorating global economic outlook, low oil prices, and high asset price volatility have created an unprecedented credit shock across a range of sectors and regions. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, due to the substantial implications for public health and safety. Given Viagogo's reliance on live events and secondary ticket sales which have been significantly affected by restrictions on crowd gatherings and given the company's exposure to the global economy and consumer spending, Viagogo remains vulnerable to shifts in market demand and sentiment in these unprecedented operating conditions.
"Viagogo's B3 CFR incorporates adequate liquidity, supported by the company's cash balances (over $400 million) plus up to 35% of availability under the company's $125 million of revolver (usage exceeding 35% subjects the company to a 5.70x first lien leverage test). Viagogo has completed a substantial portion of its cost reduction plans with insignificant amounts expected to be paid for remaining restructuring and severance costs. Given a reduced monthly burn rate, cash balances provide Viagogo the ability to operate with only nominal amounts of revenue for over 12 months. Moody's base case projections include revenues growing gradually in the first half of 2021 as a greater number of live events get scheduled across the globe next year. Tickets sales occur a few months in advance of events which typically generates cash inflows and positive working capital.
"Moody's expects a gradual return to cash flow growth given a portion of live events in 2021 will represent postponed events for which tickets have already been sold, although incremental secondary ticket selling is likely to occur. Given the time needed to ramp revenues in 2021 to approach historical levels, particularly as permitted attendance will be kept below venue capacity to allow social distancing and consumers remain cautious about large social gatherings, Moody's expects revenues in 2021 will remain well below 2019 levels.
"Over 60% of Viagogo's operating costs, including sales and marketing, is variable and tied to revenue and transaction volume. As demand for secondary tickets declined in the past few months, the company incurred reduced performance marketing spend (customer acquisition costs, lower bid pricing), reduced spending on offline marketing including brand promotion, and deferred product development costs to reduce its monthly cash burn rate and preserve liquidity."
Separately yesterday the UK competition regulator forced StubHub to make some critical ‘buyer beware’ warnings on their site. These could be summarised as follows:
- warnings on its website that the tickets it offers might be invalid
- the address of all ‘business sellers’, industry jargon for professional touts
- the removal of spurious messages claiming tickets were scarcer than they actually were
- accurate information about where buyers will be sitting
- the removal of advertisements for overseas events that may not have complied with UK law
If you had any doubt about the nature of StubHub’s operation before now those ‘improvements’ are all you really need to know.
The DAIMANI Journal has consistently campaigned against both Viagogo and StubHub as well as ‘Stubagogo’ on the basis that customers have been consistently and apparently deliberately short-changed even though they are often paying many multiples to the face value of the general admission ticket.
By contrast, DAIMANI and those like us who operate in the official VIP Hospitality industry offer a transparent and straightforward pricing model, set by the events and rightsholders, where the premium price is reinvested into the sport, the venue or artist. Often our prices for ticket plus hospitality are less than those charged, with the notorious hidden fees, by the secondary market for ticket only.
The UK’s acknowledged ticketing security expert is Reg Walker, pictured below, who has criticised the CMA’s action against StubHub as ‘risible’. Walker said the CMA should have pursued court action against StubHub over their attitude to consumer rights.
‘These companies have summarily been allowed to fleece consumers for years and years,’ Walker said. ‘[Consumers] are not receiving any protection under consumer protection law. They’re essentially being thrown under the bus.’