UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 30, 2022
MADISON SQUARE GARDEN ENTERTAINMENT CORP.
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-39245 | 84-3755666 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Two Pennsylvania Plaza, New York, NY | 10121 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 465-6000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b)). |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c)). |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Class A Common Stock | MSGE | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 | Entry Into a Material Definitive Agreement. |
National Properties Credit Facility
On June 30, 2022, MSG National Properties, LLC (“MSG National Properties”), an indirect, wholly-owned subsidiary of Madison Square Garden Entertainment Corp. (the “Company”), MSG Entertainment Group, LLC (“MSG Entertainment Group”) and certain subsidiaries of MSG National Properties entered into credit agreement with JP Morgan Chase Bank, N.A., as administrative agent and the lenders and L/C issuers party thereto, providing for a five-year, $650 million senior secured term loan facility (the “National Properties Term Loan Facility”) and a five-year, $100 million revolving credit facility (the “National Properties Revolving Credit Facility” and, together with the National Properties Term Loan Facility, the “National Properties Facilities”). The proceeds of the National Properties Facilities were used on the closing date to repay in full the obligations outstanding under MSG National Properties’ existing term loan facility (the “Existing Loan Facility”) and to pay fees and expenses in connection with the National Properties Facilities and the refinancing of the Existing Loan Facility. Proceeds of the National Properties Revolving Credit Facility may be used to fund working capital needs, for general corporate purposes of MSG National Properties and its subsidiaries, and to make distributions to MSG Entertainment Group. All capitalized terms not defined herein have the meaning set forth in the National Properties Facilities.
The National Properties Facilities include financial covenants requiring MSG National Properties and its restricted subsidiaries to maintain a specified minimum liquidity level, a specified minimum debt service coverage ratio and specified maximum total leverage ratio. The minimum liquidity level is set at $50 million and is tested based on the level of average daily liquidity, consisting of cash and cash equivalents and available revolving commitments, over the last month of each quarter over the life of the National Properties Facilities. The debt service coverage ratio covenant begins testing in the fiscal quarter ending December 31, 2022, and is set at a ratio of 2:1 before stepping up to 2.5:1 in the fiscal quarter ending September 30, 2024. The leverage ratio covenant begins testing in the fiscal quarter ending June 30, 2023. It is tested based on the ratio of MSG National Properties and its restricted subsidiaries’ consolidated total indebtedness to adjusted operating income, with an initial maximum ratio of 6:1, stepping down to 5.5:1 in the fiscal quarter ending September 30, 2024 and 4.5:1 in the fiscal quarter ending June 30, 2026.
The National Properties Facilities will mature on June 30, 2027. The principal obligations under the National Properties Term Loan Facility are to be repaid in quarterly installments beginning with the fiscal quarter ending March 31, 2023, in an aggregate amount equal to 2.50% per annum (0.625% per quarter), stepping up to 5.0% per annum (1.25% per quarter) in the fiscal quarter ending September 30, 2025, with the balance due at the maturity of the facility. The principal obligations under the National Properties Revolving Credit Facility are due at the maturity of the facility. Borrowings under the National Properties Facilities bear interest at a floating rate, which at the option of MSG National Properties may be either (i) a base rate plus an applicable margin ranging from 1.50% per annum to 2.50% per annum or (ii) Term SOFR plus an applicable margin ranging from 2.50% per annum to 3.50% per annum, in each case, depending on the total leverage ratio of MSG National Properties and its restricted subsidiaries.
All obligations under the National Properties Facilities are guaranteed by MSG Entertainment Group and MSG National Properties’ existing and future direct and indirect domestic subsidiaries, other than the subsidiaries that own The Madison Square Garden Arena and certain other excluded subsidiaries (the “Subsidiary Guarantors”). All obligations under the National Properties Facilities, including the guarantees of those obligations, are secured by certain of the assets of MSG National Properties and the Subsidiary Guarantors (collectively, “Collateral”) including, but not limited to, a pledge of some or all of the equity interests held directly or indirectly by MSG National Properties in each Subsidiary Guarantor. The Collateral does not include, among other things, any interests in The Madison Square Garden Arena or the leasehold interests in Radio City Music Hall and the Beacon Theatre. Under certain circumstances, MSG National Properties is required to make mandatory prepayments on loans outstanding, including prepayments in an amount equal to the net cash proceeds of certain sales of assets or casualty insurance and/or condemnation recoveries (subject to certain reinvestment, repair or replacement rights), subject to certain exceptions.
In addition to the covenants described above, the National Properties Facilities and the related security agreement contain certain customary representations and warranties, affirmative and negative covenants and events of default. The National Properties Facilities contain certain restrictions on the ability of MSG National Properties and its restricted subsidiaries to take certain actions as provided in (and subject to various exceptions and baskets set forth in) the National Properties Facilities, including the following: (i) incur additional indebtedness; (ii) create liens on certain assets; (iii) make investments, loans or advances in or to other persons; (iv) pay dividends and distributions or repurchase capital stock (which will restrict the ability of MSG National Properties to make cash distributions to the Company); (v) repay, redeem or repurchase certain indebtedness; (vi) change its lines of business; (vii) engage in certain transactions with affiliates; (viii) amend their respective organizational documents; (ix) merge or consolidate; and (x) make certain dispositions.
The credit agreement governing the National Properties Facilities and the related security agreement have been filed as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, respectively. The description of the agreements contained herein is qualified in its entirety by reference to the agreements, which is incorporated into this Item 1.01 by reference.
Item 1.02 | Termination of a Material Definitive Agreement. |
On June 30, 2022, a portion of the proceeds of the National Properties Facilities were used to repay in full the term loans under the Existing Loan Facility and the loan documents related thereto have been terminated.
Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information contained in Item 1.01 above is hereby incorporated by reference into this Item 2.03.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MADISON SQUARE GARDEN ENTERTAINMENT CORP. | ||
(Registrant) | ||
By: | /s/ Philip D’Ambrosio | |
Name: | Philip D’Ambrosio | |
Title: | Senior Vice President and Treasurer |
Dated: July 7, 2022