WILMINGTON, Del (Reuters) - SFX Entertainment Inc SFXE.O, a promoter of electronic dance music festivals, reached a debt-cutting deal with its bondholders and filed for Chapter 11 bankruptcy on Monday, which could benefit rival Live Nation Entertainment Inc (LYV.N).
SFX said it reached an agreement with a group of creditors who agreed to convert $300 million of bond debt into ownership of the company.
Bondholders also agreed to loan SFX up to $115 million to refinance $50 million of loans and provide funds to pay performers, production crews and royalties for its streaming service Beatport.
SFX, which began operations in 2012, said it would keep producing days-long festivals and events, including TomorrowWorld and Electric Zoo, although one analyst said the company probably would cut back on its productions.
“Live Nation will stand to benefit because this creates a little runway in the electronic dance music and festivals market,” said Rich Tullo of Albert Fried & Co.
SFX raised $260 million in a 2013 initial public offering and began scooping up promoters and festivals such as Dayglow Productions, known for its paint parties. Last year SFX sold 3 million tickets at more than 100 festivals and 1,100 other events worldwide, according to court records.
However, the company has never turned a profit.
SFX said in documents filed in the U.S. Bankruptcy Court in Wilmington, Delaware, that a strengthening U.S. dollar has undercut the value of tickets, which were sold in local currencies. It also blamed the rising cost of security and the slow integration of festivals it purchased.
SFX stock ended down 47 percent on Monday at 6.9 cents on Nasdaq. The company’s chief executive, Robert Sillerman, owns about 40 percent of the company’s stock, which will likely be rendered worthless in the bankruptcy.
The company said that after its debt was downgraded in August, vendors and partners tightened credit terms, draining the company’s liquidity.
SFX solicited bids for the company last year, and in late October announced it had received preliminary indications of interest, including from Sillerman. He later withdrew his bid.
In 2000, Sillerman sold a concert promoter with the same SFX name to Clear Channel Entertainment for $4.4 billion. Those promoters are now part of Live Nation.
In December, Reuters reported that Live Nation showed an interest in acquiring SFX.
Shares of Live Nation ended down 1 percent at $22.46 on the New York Stock Exchange.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Bernadette Baum, Marguerita Choy and David Gregorio