Liberty Media has made some complicated changes within its companies – Live Nation, SiriusXM and F1 – with reattribution as teams paid in advance.
With COVID-19 pandemic raging on and wrecking havoc around the globe, Liberty Media has made changes within the company with reattribution as it tries to consolidate the financial losses, it is to see with no business, whether it is concerts of F1 races.
Under reattribution, Liberty Media has reattributed $1.5 billion in net asset value to F1 from Liberty SiriusXM Group, while it has reattributed another $1.5 billion in net asset value to Liberty SiriusXM from F1 – whereby the sports gets more money in cash.
F1 has been injected by about $1.4 billion as the entire stake has been shifted from Live Nation to SiriusXM Group, as the former is in troubled waters already with no music concerts happening. The idea was to separate F1 and Live Nation.
This way, Liberty Media, is not over-burdened by losses for both the companies. “We are excited to announce the completed reattribution between Formula One Group and Liberty SiriusXM Group,” said Greg Maffei, Liberty Media President & CEO.
“The new Formula One Group now has a strengthened balance sheet that positions us to support and enhance the F1 business while also being opportunistic during these challenging times. We believe the reattribution is also responsive to the request of many Formula One Group shareholders to create a more focused currency.
“For Liberty SiriusXM, this combines a complementary set of businesses that are established leaders in the live and audio entertainment space. Both the new Formula One Group and Liberty SiriusXM Group now have currencies with which to complete acquisitions, raise capital and engage in share repurchases, among other things.”
The details of the reattribution as per the statement from Liberty Media goes:
In summary, $1.5 billion of net asset value has been reattributed from Formula One Group to Liberty SiriusXM Group including:
- Assets of $2.8 billion
- Entire Live Nation Entertainment (NYSE: LYV) stake consisting of 69.6 million shares of common stock = $2.6 billion
- Newly created FWON intergroup interest to cover exposure under 1.375% convertible note, 5.3 million shares = $126 million
- Entire Liberty SiriusXM intergroup interest representing portion of LSXM shares underlying the 1.375% convertible note, 1.9 million shares = $58 million
- 1.375% convertible note call spread = $53 million
- Portion of Braves Group intergroup interest that underlies the 1.375% convertible note, 2.3 million shares = $42 million
- Liabilities of $1.3 billion
- 1.375% cash convertible note due 2023, principal amount $1.0 billion = market value $947 million
- 2.25% exchangeable senior debentures due 2048, principal amount $385 million = market value $368 million
- Live Nation margin loan, capacity of $270 million, no amount drawn
Similarly, $1.5 billion of net asset value has been reattributed from Liberty SiriusXM Group to Formula One Group, comprised of:
- Live Nation call spread = $165 million (described below)
- Net cash payment of $1.4 billion, sourced from:
- Intergroup loan owed to Formula One Group, 5.75% interest rate, pre-payable without penalty = $750 million (the “Intergroup Loan”)
- Liberty SiriusXM cash on hand ($345 million available as of 3/31) = $207 million
- SiriusXM margin loan, $1.35 billion total capacity, $350 million drawn plus $400 million new draw (bringing balance to $750 million)
“The Formula One Group ceased its purchases of Liberty SiriusXM Group in March and does not plan to purchase any additional Liberty SiriusXM Group shares. The Liberty SiriusXM Group suspended its stock repurchase activity in March and will reevaluate the resumption of repurchases after the public announcement of its earnings for the first quarter.
“The total remaining repurchase authorization for Liberty Media as of March 31, 2020 is approximately $1.2 billion and can be applied to repurchases of Series A and Series C shares of any of the Liberty Media tracking stocks. As part of the Reattribution, Formula One Group and Liberty SiriusXM Group entered into a call spread. Formula One Group bought, from Liberty SiriusXM Group, a European call option on 34.8 million Live Nation shares with a strike price of $36.72 (the “Reattribution Price”) with an expiration date of April 22, 2021.
“Simultaneously, Formula One Group sold, to Liberty SiriusXM Group, a European call option on 34.8 million Live Nation shares with a strike price of $47.74, a 30% premium to the Reattribution Price, with an expiration date of April 22, 2021. The net cost of this call spread was $165 million, which offsets a portion of the value of the assets reattributed from the Liberty SiriusXM Group to the Formula One Group.”
Aside the reattribution, Liberty Media, also confirmed that advanced payments have been made to certain F1 teams – much like Dorna Sports did – to help them amid COVID-19 pandemic. Additionally, they are trying to see what can be done in long-term.
With no races happening, it will be difficult to pay up several F1 teams and Liberty Media cautioned that they don’t have an open cheque book for it. They are trying to stage races – even if without fans, which has another trouble – but priority is to have some rounds.
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