Business Context and Reporting Period
Company: The Madison Square Garden Company (MSG)
Filing Type: Form 8-K (Current Report)
Date of Report: May 23, 2019
Subject: Entry into material definitive credit agreements by TAO Group Operating LLC (Senior Borrower) and TAO Group Sub-Holdings LLC (Subordinated Borrower), subsidiaries consolidated by MSG. The filings detail the refinancing of prior debt obligations.
Key Financial Metrics and Debt Structure
The filing details the establishment of new credit facilities totaling $114 million to replace a prior credit agreement dated January 31, 2017.
| Facility Type | Amount | Term | Interest Rate Structure |
|---|---|---|---|
| Senior Term Loan | $40 million | 5 years (Matures May 23, 2024) | Base Rate + 1.50% to 2.50% OR Eurocurrency Rate + 2.50% to 3.50% |
| Senior Revolving Credit | $25 million | 5 years | Same as Term Loan; includes $5 million sub-limit for letters of credit |
| Subordinated Term Loan | $49 million | 5 years (Matures August 22, 2024) | Lender: MSG Entertainment Holdings LLC |
Liquidity and Usage: Proceeds were used to repay all obligations under the terminated 2017 credit agreement. Remaining proceeds are designated for working capital and general corporate purposes.
Covenants:
- Maximum Total Leverage Ratio: 4.00:1.00 (until Dec 31, 2021); 3.50:1.00 (thereafter).
- Maximum Senior Leverage Ratio: 3.00:1.00 (until Dec 31, 2021); 2.50:1.00 (thereafter).
- Minimum Fixed Charge Coverage Ratio: 1.25:1.00.
Material Changes Versus Prior Period
Debt Refinancing: The company terminated its prior credit agreement dated January 31, 2017, in its entirety on May 23, 2019. This was replaced by the new Senior Credit Agreement and Subordinated Credit Agreement.
Ownership Structure: MSG indirectly owns a 62.5% interest in the Subordinated Borrower, which is the indirect parent of the Senior Borrower. MSG consolidates these entities.
Security: The new obligations are secured by substantially all assets of the Senior Borrower and Guarantors, including equity pledges.
Guidance, Outlook, and Risks
Management Commentary: The filing is a disclosure of a material definitive agreement and does not contain forward-looking guidance, earnings outlook, or management commentary regarding future performance.
Risks and Contingencies:
- Covenant Compliance: The borrower must maintain specific leverage and coverage ratios. Failure to comply could trigger an event of default.
- Restrictions: The agreements restrict the ability to incur additional indebtedness, create liens, make investments, pay dividends, or engage in certain affiliate transactions without meeting specific conditions.
- Prepayment: Mandatory prepayments are required from net cash proceeds of asset sales or casualty insurance recoveries.
Investor Verification Checklist
- Verify the exact interest rate margins applicable based on the current total leverage ratio of Intermediate Holdings.
- Confirm the status of the $5 million letter of credit sub-limit within the revolving facility.
- Review the consolidated balance sheet to assess the impact of the new $114 million debt load on the company's overall leverage ratios.
- Monitor compliance with the 4.00:1.00 total leverage ratio covenant through December 31, 2021.
- Check for any subsequent amendments to the credit agreements filed as exhibits 10.1 and 10.2.