SFXE Founder Sillerman To Receive 29.5% Interest, As EDM Giant Grabs $60 Million Lifeline
EDM giant SFX (NASDAQ: SFXE) has been on life support in recent weeks after a series of poor financial reports and a failed attempt by founder and CEO Robert Sillerman to take the company private. Investors were not impressed and drove SFXE stock from over $5 to less than 50 cents per share.
Financially strapped SFX Entertainment announced that it has secured $90 million in new financing and revolving credit. The lifeline comes from both new and existing investors, with $60 million in private placement financing and $30 million in a revolving credit facility.
$30 million of the $60 million in private placement financing came from founder Robert F.X. Sillerman, who will receive dividends in kind on his new investment at a whopping 29.5% for 2 years (more details below).
“While the Company continues to explore strategic alternatives," Sillerman, the Company’s Chairman and CEO said in a statement, "this solidifies SFX for the short and long term, so we can focus on producing great festivals and events and operating globally recognized digital properties."
The company has created a special committee to consider proposals to purchase the entire company, as well as, assets not central to its core business, with a deadline of October 2nd.
The $60 million private placement financing consists of:
- The sale of $30 million in Senior Convertible Preferred Stock to an institutional investor. The Senior Convertible Preferred Stock is convertible into shares of the Company's common stock at $1.75 per share and pays a 9 percent cash dividend; and,
- The sale of $30 million in Junior Preferred Stock to Sillerman Investment Partners III LLC, an entity controlled by Sillerman. This is comprised of a completed purchase of $15 million of the Junior Preferred Stock and a fully-committed obligation by Sillerman Investment Partners to purchase an additional $15 million over the next 30 days. The Junior Preferred Stock pays dividends in kind at 29.5 percent for two years and will pay a 9 percent cash dividend afterwards.
Concurrently with the private placement, the Company entered into an agreement with GoldenTree Asset Management LP, an asset management company specializing in corporate and structured credit markets, whereby the Company’s existing lenders have assigned to GoldenTree their interest in the Company’s existing $30 million revolving credit facility.
SFXE stock jumped from under 50 cent per share to almost 70 cents after the new broke late yesterday. Friday morning, the stock was trading around 65 cents per share.