Fame and Fortune: French billionaire François-Henri Pinault purchased a majority stake in CAA, the agency that represents his wife, actress Salma Hayek.
Jeff Kravitz/FilmMagic
The powerful talent agency is facing financial difficulties from the Hollywood strikes – but its outlook remains stable, a new report says.
The sale of a majority stake in talent agency CAA by private equity firm TPG to investment firm Artemis, controlled by French luxury goods billionaire François-Henri Pinault, at a $7 billion valuation, is set to leave CAA with significant credit risk. In a report released yesterday by Moody’s Investors Service. Pinault, the 61-year-old CEO of Kering (which controls Gucci, Saint Laurent and Baleniaga, among other brands), and his family are worth $34.8 billion.
TPG first invested in CAA in 2010 and increased its stake to 53% in 2014 in a deal valuing the agency at $1.1 billion. CAA is known for representing some of the biggest stars in film, television, theater, music, video games, publishing and fashion – including Steven Spielberg, Reese Witherspoon and Pinault’s wife, actress Salma Hayek. Its sports division has been the world’s most valuable sports agency for nine consecutive years.
The rating agency has assigned a B2 corporate family rating (CFR) and a B2-PD probability of default rating (PDR) to Creative Artists Agency, LLC (CAA). The B2 rating on the existing term loan and revolving credit facility (which will be increased from $76 million to $271 million) was affirmed and transferred to CAA. Moody’s has also assigned a B2 rating to CAA’s proposed $425 million term loan. Moody’s says the rating outlook is stable.
Obligations rated B2 are considered speculative and are subject to higher credit risk. “CAA’s B2 CFR reflects high leverage levels and Moody’s expectation that operating results will be subdued in the near term until the WGA and SAG strikes are resolved, but will recover relatively quickly as a portion of the impacted revenues are recovered,” the report said. “A significant portion will be realized in future quarters.” ,
Post the deal, CAA’s leverage will increase from 4.6 times to operating income (in the sense of earnings before interest, taxes, depreciation and amortization) to 5.6 times by June 30, 2023. “Leverage will increase in the near term due to the decline in EBITDA resulting from the impact of the Writers Guild of America (WGA) and Screen Actors Guild (SAG) strikes, but Moody’s expects the impact on operating performance to moderate once the strikes end due to higher demand. A significant part of will be recovered. Quality content,” according to the rating agency.
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