Food, beverage, merchandise retail and stadium operations giant, Legends, is seeking to raise up to $500m (£366.6m/€412.3m) to help it ride out the impact to its business caused by COVID-19, according to US credit rating agency Fitch Ratings.
Fitch said the refinancing transaction is being executed concurrently with a proposed equity investment by Sixth Street. Legends on Tuesday confirmed it had signed an agreement for the global investment firm to become its new majority owner, a deal reportedly valuing the company at $1.35bn.
Sixth Street will lead the Legends partnership group alongside co-founders YGE Holdings, an affiliate of Major League Baseball (MLB) club the New York Yankees, and Jones Concessions, an affiliate of NFL American football team the Dallas Cowboys.
According to Fitch, Legends is seeking to sell $350m in senior secured notes and create a $150m revolving credit facility, which it has the option to access. With the proposed $500m worth of financing deals, Legends would have $625m in total debt.
This would consist of the four-year $150m credit facility, the $350m in five-year senior secured notes and a six-year unsecured payment-in-kind loan of $125m. In its report, Fitch detailed the impact that the global pandemic has had on Legends’ business model.
Fitch said: “The onset of the pandemic coincided with the beginning of the Major League Baseball season as well as the start of peak entertainment months for live performances which resulted in restrictions or prohibitions on fan attendance and, in many cases, event cancelations.
“While attendance has increased in recent months due to the kick-off of the National Football League season in September, Fitch’s rating case assumes attendance will remain below 25% of capacity through the first half of 2021 as municipalities remain vigilant in containing the virus while vaccines are distributed.
“Legends’ meaningful exposure to major metropolitan areas in New York and California, where containment measures like lockdowns and occupancy restrictions have been more aggressive, will be a drag on recovery as the economies in these areas could take longer than anticipated to rebound, impacting the tourist-driven attractions business.”
While FCF (free cash flow) is expected to remain negative through 2022, Fitch believes the company’s liquidity position is sufficient to carry the company through to 2023 when FCF is expected to return to neutral, though it added there remains “significant uncertainty” as to the pace of the industry’s recovery.
Looking forward, Fitch said that while COVID-19 has reduced the willingness of customers to attend live events, it expects that over the medium term, the shift in consumer spending from products to experiences is likely to resume and “provide a tailwind” for Legends.
The agency noted Legends’ reputation as a provider of premium services and its track record of improving growth in customer spend has enabled the company to win key contracts in many high profile projects, including SoFi Stadium, the new home of the NFL’s Los Angeles Rams and Chargers, and the management of LaLiga football club Real Madrid’s omnichannel retail operations.
It adds that while Legends competes with several larger, better-capitalised companies in its core hospitality segment, including Aramark, Compass Group and Sodexo, it often leads in its other segments, including planning and partnerships.
With this in mind, Fitch believes the company has “ample opportunities for growth” despite the limited inventory of stadiums and arenas that are the source of the bulk of the company’s revenues. It said that of the company’s over 200 clients at the end of 2019, under 21% utilised more than one of Legends’ services, providing “meaningful opportunity” to expand within its existing client base.
It also added that less than 1% of Legends’ 2019 revenue was derived from international operations.
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