| Item 1.01 | Entry Into a Material Definitive Agreement. |
Amendment to Credit Facility
On June 9, 2022, Tao Group Operating LLC (the “Senior Borrower”) and Tao Group Intermediate Holdings LLC (“Intermediate Holdings”), the direct parent of the Senior Borrower, entered into the Amendment and Restatement Agreement (“Amendment and Restatement”) to amend and restate the credit agreement (as amended by Amendment No. 1 to Credit Agreement, dated as of August 6, 2020 (“Amendment No. 1”), the “Credit Agreement”; the Credit Agreement, as amended and restated by the Amendment and Restatement, the “Restated Credit Agreement”) with JPMorgan Chase Bank, N.A., as agent, and the lenders party thereto. The Credit Agreement was entered into on May 23, 2019, along with a credit agreement between Tao Group Sub-Holdings LLC (the “Subordinated Borrower”) and MSG Entertainment Holdings LLC, as agent and lender (as amended by Amendment No. 1 to Credit Agreement, dated as of July 12, 2019 and effective as of May 23, 2019, Amendment No. 2 to Credit Agreement, dated as of June 15, 2020 and Amendment No. 3 to Credit Agreement, dated as of August 6, 2020, the “Subordinated Credit Agreement”), pursuant to which MSG Entertainment Holdings LLC extended subordinated term loans to the Subordinated Borrower. The Credit Agreement was set to mature on May 23, 2024 and the Subordinated Credit Agreement was set to mature on August 22, 2024. All capitalized terms not defined herein have the meaning set forth in the Restated Credit Agreement.
Madison Square Garden Entertainment Corp. (the “Registrant”) indirectly owns a 66.9% interest in the Subordinated Borrower, which is the indirect parent company of the Senior Borrower. The Credit Agreement previously provided the Senior Borrower with senior secured credit facilities (the “Tao Senior Secured Credit Facilities”) consisting of: (i) an initial $40 million term loan facility with a term of five years (the “Tao Term Loan Facility”) and (ii) a $25 million revolving credit facility with a term of five years (the “Tao Revolving Credit Facility”). Prior to giving effect to the Amendment and Restatement, the outstanding principal amount of the Tao Term Loan Facility was $25 million. Up to $5 million of the Tao Revolving Credit Facility was available for the issuance of letters of credit. All borrowings under the Tao Revolving Credit Facility, including, without limitation, amounts drawn under the revolving line of credit, are subject to the satisfaction of customary conditions.
The Amendment and Restatement amends and restates the Credit Agreement to, among other things:
| | • | | extend the maturity date of the Tao Term Loan Facility to June 9, 2027 and the commitment expiration date of the Tao Revolving Credit Facility to June 9, 2027; |
| | • | | increase the Tao Term Loan Facility to $75 million and the Tao Revolving Credit Facility to $60 million; |
| | • | | increase the minimum liquidity for the Senior Borrower to $20 million and maximum capital expenditures to $30 million per year, with a one year carry forward of $20 million; |
| | • | | increase the basket for the maximum amount of the incremental revolving credit facility to $50 million; and |
| | • | | amend certain other financial covenants regarding leverage to allow up to $10 million of cash netting. |
Borrowings under the Restated Credit Agreement bear interest at a floating rate, which at the option of the Senior Borrower may be either (a) a base rate plus an additional rate ranging from 1.50% to 2.00% per annum (determined based on a total net leverage ratio), or (b) a SOFR rate plus an additional rate ranging from 2.50% to 3.00% per annum (determined based on a total net leverage ratio). The Restated Credit Agreement requires the Senior Borrower to pay a reduced commitment fee of 0.375% in respect of the daily unused commitments under the Tao Revolving Credit Facility.
The Tao Senior Secured Credit Facilities are without recourse to the Registrant or any of its affiliates (other than Intermediate Holdings, the Senior Borrower and certain of its subsidiaries).
The Amendment and Restatement has been filed as Exhibit 10.1 to this Current Report on Form 8-K and the Restated Credit Agreement has been filed as Exhibit 10.2 to this Current Report on Form 8-K. The description of those agreements contained herein is qualified in its entirety by reference to those agreements, which are incorporated into this Item 1.01 by reference.
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