Item 1.01 Execution of Material Final Contracts.
MSG Sphere Credit Facility
upon December 22, 2022, MSG Las Vegas, LLC (“MSG LV”), an indirect wholly-owned subsidiary of Madison Square Garden Entertainment Corporation (“Company”), enter into a credit agreement with JPMorgan Chase Bank, NAas managing agent and its lender for five years, $275 million Senior Secured Term Loan Facility (“Sphere Facility”). All obligations under the Sphere Facility are MSG Entertainment Group, LLC (“MSGE GroupAll capitalized terms not defined herein have the meaning ascribed to them at the Sphere facility.
We are currently moving forward with plans for MSG Sphere. MSG Sphere is a state-of-the-art venue that combines cutting-edge technology with multi-sensory storytelling to deliver an immersive experience at unparalleled scale.The first MSG Sphere is currently under construction Las Vegas (“Las Vegas Sphere”) and is on track to open in the second half of 2023. The Sphere facility will allow us to further fund the development of content, including original attractions, which we expect will generate significant revenue. For MSG Sphere.
The Sphere Facility contains financial covenants that require MSG LV to maintain certain minimum debt service coverage ratios. MSGE Group To maintain a certain minimum liquidity level.Debt Service Coverage Covenant Begins Testing End of Fiscal Quarter December 31, 2023 It will also be tested prospectively beginning in the first fiscal quarter following the date of the first ticketed performance or event open to the public at the Las Vegas Sphere (“Opening Date”). Both historical and future debt service coverage ratios are set at 1.35:1. Additionally, MSG LV is not permitted to make distributions, among other conditions. MSGE Group unless the historical and future debt service coverage ratio is at least 1.50:1.minimum liquidity level of MSGE Group is set to $100 millionWhen $75 million Must be held in cash or cash equivalents, the amount of which will be held as collateral in the Sphere Facility prior to the Liquidity Covenant Reduction Date (defined below) until released on the Liquidity Covenant Reduction Date (defined below). must be held in an account deposited as “Pledged Account”), before stepping down
$50 millionWhen $25 million Once the Las Vegas Sphere is substantially complete and any portion of its system is ready for use at a live immersive event, it must be held in cash or cash equivalents (“Liquidity Commitment Reduction Date”). Minimum liquidity levels are tested on the closing date and the last day of each fiscal quarter thereafter. of the MSGE Group
Unsecured liquidity consisting of current cash and cash equivalents and available lines of credit. If we complete a spin-off of a traditional live entertainment business (“MSGE Spinoff”) that we are currently considering (“MSGE Spinoff”) and retain economic interest in a live entertainment company (“Live Entertainment Company Retained Interest”), we will A retained interest is pledged to secure the Sphere Facility until the pledge is released on the liquidity commitment reduction date, and a portion of the value of the live entertainment company’s retained interest may also be added to the minimum liquidity level .
Sphere facility December 22, 2027The principal obligations under the Sphere Facility are payable upon maturity of the facility and there are no amortization payments prior to maturity. Borrowings under the Sphere Facility are at variable interest rates and, at MSG LV’s option, are at (i) the base interest rate plus a margin of 3.375% per annum or (ii) adjusted Term SOFR (Term SOFR plus 0.10%). ). %) plus a margin of 4.375% per annum.
All obligations under the Sphere Facility, including the guarantees of these obligations, are secured by all assets of MSG LV and certain assets of MSG LV.
MSGE Group (collectively, “Collateral”) includes, but is not limited to, MSG LV’s leasehold interest in the land on which the Las Vegas Sphere is located, and the pledge of all equity interests directly held by MSG LV. MSGE Group Pledge accounts and pledges of retained interest for live entertainment companies after completion of MSGE spin-offs until the MSG LV and liquidity commitment reduction date. Under certain circumstances, MSG LV is required to make mandatory prepayments on loans. This includes an advance payment in an amount equal to the net cash proceeds for property and casualty insurance and/or damages (subject to certain reinvestment, repair or replacement rights). exception.
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In addition to the above terms and conditions, the Sphere Facility and related guarantees, collateral and pledge agreements contain certain customary representations and warranties, affirmative and negative covenants, and events of default. Sphere facilities include: MSG LV and MSGE Group take any particular action as specified in the Sphere Facility and any related guarantees, collateral and pledge agreements (and subject to the various exceptions and baskets specified therein); This includes: (ii) mortgage any property intended for development as Las Vegas Sphere, Live Entertainment Company Retained Interest, or MSG Sphere; London(iii) invest, lend or make advances to or in any other person; (iv) payment of dividends and distributions (this limits MSG LV’s ability to make cash distributions to us); (v) change the nature of business; (vi) engage in certain transactions with affiliates; (vii) modify organizational documents; (viii) merger or consolidation; (ix) take certain actions;
Guarantees provided by the Credit Agreement governing the Sphere Facility MSGE Group The related security and pledge agreements are also filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, of this Current Report on Form 8-K. The Agreement descriptions contained herein are qualified in their entirety by reference to the Agreement incorporated by reference in this Section 1.01.
Item 2.03 Direct financial obligations or creation of obligations under registrant’s off-balance sheet agreements.
The information contained in item 1.01 above is incorporated by reference into this item 2.03.
Item 9.01 Financial Statements and Materials.
(d) Exhibits
Exhibit
Number Description
10.1 Credit Agreement, dated as of December 22, 2022, among MSG Las
Vegas, LLC, the lenders party thereto and JPMorgan Chase Bank, N.A.,
as administrative agent.
10.2 Pledge and Security Agreement, dated as of December 22, 2022, by and
between MSG Las Vegas, LLC and JPMorgan Chase Bank, N.A.
10.3 Guaranty Agreement, dated as of December 22, 2022, by MSG
Entertainment Group, LLC in favor of JPMorgan Chase Bank, N.A. on
behalf of the lenders.
10.4 Pledge Agreement, dated as of December 22, 2022, by MSG
Entertainment Group, LLC in favor of JPMorgan Chase Bank, N.A. on
behalf of the lenders.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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