Moody’s trims Viagogo

Moody’s Investors Service said it downgraded PUG LLC’s (Viagogo) corporate family rating to B2 from B1 as a result of the incremental debt issuance of $400 million, $200 million of which reduces the preferred equity portion of the financing for the purchase of StubHub with the remainder contributing to balance sheet cash at closing. Moody’s also downgraded Viagogo’s probability of default to B2-PD from B1-PD and the senior secured first-lien credit facility to B2 from Ba3. The agency withdrew the B3 senior secured second-lien instrument rating. The outlook remains stable.

Viagogo intends to increase the new term loan to $2.2 billion from the originally planned $1.475 billion, split between two tranches of dollar and euro denominations. The $725 million increase in first-lien debt is partially offset by the elimination of the originally proposed $325 million of second-lien notes. The resulting net $400 million increase in funded debt balances will contribute $200 million to balance sheet cash at closing with the remaining $200 million going towards reducing the preferred equity portion of the financing of the StubHub acquisition. Additional common equity of $86 million will be raised in the new capital structure also contributing to balance sheet cash at closing. Although the equity portion of the $4.05 billion purchase price remains above 50%, Viagogo’s decision to reduce the equity contribution reflects aggressive financial policies which are incorporated in the B2 rating, Moody’s said.

The downgrade of Viagogo’s rating to B2 reflects the increase in adjusted debt to EBITDA to the mid 5x range at closing (includes credit for the majority of targeted cost synergies, roughly 9x without synergies) from the originally proposed mid-4x range. The downgrade also reflects Viagogo’s increasing gross debt balances while simultaneously taking on integration risk of the much larger StubHub operations.

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