Business Context and Reporting Period
Madison Square Garden Entertainment Corp. filed this Form 8-K on July 7, 2022, reporting events occurring on June 30, 2022. The filing concerns the refinancing of debt at MSG National Properties, LLC, an indirect wholly owned subsidiary.
Key Financial Terms and Liquidity
- New term loan: $650 million senior secured term loan facility with a five-year maturity on June 30, 2027.
- Revolving facility: $100 million senior secured revolving credit facility, also maturing June 30, 2027.
- Use of proceeds: Repaid the existing MSG National Properties term loan in full and paid related fees and expenses. Revolving borrowings may fund working capital, general corporate purposes, and distributions to MSG Entertainment Group.
- Interest rate: Base rate plus a 1.50%–2.50% margin or Term SOFR plus a 2.50%–3.50% margin, depending on total leverage.
- Mandatory amortization: Term loan amortization begins in the quarter ending March 31, 2023, at 2.50% annually, increasing to 5.00% annually in the quarter ending September 30, 2025; the remaining balance is due at maturity.
- Minimum liquidity covenant: $50 million of average daily liquidity, tested during the last month of each quarter.
- Debt service coverage covenant: Begins testing for the quarter ending December 31, 2022, at 2.0:1 and increases to 2.5:1 in the quarter ending September 30, 2024.
- Leverage covenant: Begins testing for the quarter ending June 30, 2023, at a maximum of 6.0:1, stepping down to 5.5:1 in September 2024 and 4.5:1 in June 2026.
Material Changes Versus the Prior Comparable Period
The filing does not present comparative revenue, profit, cash flow, or margin information. The material change is the replacement of the existing MSG National Properties term loan with the new $650 million term loan and $100 million revolving credit facilities. The prior term loan and related loan documents were terminated after repayment in full.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The facilities are secured by specified assets of MSG National Properties and guarantors, including certain equity interests, but generally exclude interests in The Madison Square Garden Arena and leasehold interests in Radio City Music Hall and the Beacon Theatre.
- MSG Entertainment Group and specified domestic subsidiaries guarantee the obligations, subject to exclusions described in the credit agreement.
- The credit agreement restricts additional indebtedness, liens, investments, distributions, certain debt repayments, business changes, affiliate transactions, mergers, and asset dispositions, subject to negotiated exceptions.
- Mandatory prepayments may be required from certain asset-sale proceeds and casualty or condemnation recoveries, subject to reinvestment and other exceptions.
- The floating-rate structure creates exposure to changes in base rates and Term SOFR. The filing provides no management earnings guidance or operating outlook.
Investor Verification Checklist
- Verify the final outstanding balance, borrowing status, and availability under the revolving facility.
- Review subsequent financial statements for compliance with the $50 million liquidity, debt service coverage, and leverage covenants.
- Assess the effect of floating interest rates and required term-loan amortization on cash flow.
- Review the filed credit agreement and security agreement for detailed collateral, guarantor, covenant, exception, and default provisions.
- Confirm whether the refinancing changed distributions or other upstream cash-transfer capacity to the parent company.