NSO’s reckoning was a long time coming, and it might have happened sooner if the debt was more liquid. When marketing its loan in 2019, the company was already facing heat for helping the Saudi government spy on Jamal Kashoggi before his murder, and aiding the Mexican government’s surveillance of civilians. 

In an open letter, Amnesty International highlighted these and other human rights concerns involving the company. In short, it was clear that NSO might be a troublesome credit; accordingly, it struggled to syndicate its debt. 

Since then, the bad news has piled up—the WhatsApp hacking scandal, a list of its targets, a lawsuit from Apple. NSO has become infamous among loan investors: according to 9fin sources, multiple buyside firms have used it as a case study in investor presentations, to show off their ESG screening process. 

But even three years ago, this must have seemed a little absurd: what kind of ESG filter wouldn’t catch a company like NSO?

Live Nation is different. It’s the world’s largest live events company, with publicly traded stock and a liquid capital stack. It’s had antitrust issues, and allegedly hacked an acquisition target’s IT systems, but it’s not exactly spying on civilians.

Large gatherings came under sudden scrutiny during the pandemic for public health reasons. But in the normal course of business, it’s rare for debt investors to mention the entertainment industry when discussing ESG risks in their portfolio. Should it be? 

At the last count, Live Nation is facing nearly 200 lawsuits related to Astroworld, alleging that it sacrificed safety to sell more tickets, leading to a “predictable” tragedy. In the aftermath, it emerged that Houston’s police chief had personally warned Scott about the crowd.

Court filings connect Live Nation events with hundreds of other deaths and injuries in the past decade. Its involvement in some of these, such as the 2017 mass shooting in Las Vegas, is circumstantial; in others, like a deadly stage collapse in Indiana, it led to the company paying financial settlements.

Assessing the damage

The initial impact of Astroworld on Live Nation’s popularity with shareholders is quantifiable: its share price has fallen about 12% since the event, the kind of decline that leads lawyers to issue press releases about potential securities claims (the stock is still up about 65% since this time last year).

Its debt has suffered less. The company’s 2028 secured notes are most affected, down three points since the event. But they still trade at a dollar price of 97.5—a far cry from the distressed quotes on NSO’s term loan.

In the days following the Houston disaster, creditors speaking with 9fin were unfazed about the financial implications for Live Nation, noting that insurance would likely cover the costs of any settlement, and that the company is not short of cash.

The prospect of a broader probe into whether the company routinely endangers concertgoers—of the kind that took Purdue Pharma and other drug companies to task for their role in the opioid crisis—also seems, at least for these investors, comfortably remote.

Identifying such patterns of behavior and proving responsibility are extremely challenging, they point out. And from a more cynical standpoint, the company'y business is safe: if Live Nation isn’t putting on concerts, who will?

Picking up the pieces

Still, even if debtholders remain insulated, could the Astroworld fallout encourage them to rethink the way they approach ESG?

In the case of Live Nation, the ‘social’ part of the equation is significant. Live events involve huge crowds, so on an extremely basic level, it follows that they involve huge social responsibility. 

Furthermore, the pandemic has created two potentially opposing forces in the industry: on the one hand, increased pressure to ensure people are gathering safely, and on the other, pressure to boost ticket sales as promoters and artists make up for lost time.

This responsibility overlaps with the ‘governance’ factor of ESG. Given its size, Live Nation should have extensive expertise in crowd safety, and transparency around those standards. But its dominance reduces the ability of the market to self-regulate in this respect, making ESG enforcement even more paramount.

If NSO represents the past of the ESG movement—buysiders boasting to investors about blacklisting an obviously problematic company—then perhaps Live Nation offers a glimpse of its potential future, one where ESG is more thoughtful and proactive.

Filtering out weapons manufacturers and fossil fuels isn't difficult; it’s a lot harder, but potentially just as important, to force accountability at a company like Live Nation (the company did not respond to 9fin’s request for comment).

“It is easy to poke holes in coal companies,” one CLO manager told 9fin. “In terms of ESG, those are the obvious ones. The hard ones are the hidden ones.” 

Investors sometimes compare ESG to cancel culture. This term implies a sense of unfairness, of trigger-happy vigilante justice; but such vigilantism originated partly from a collapse of trust in institutions that are meant to hold power to account.

Take the #MeToo movement. For years, powerful figures committed abuses with impunity, as the systems ostensibly put in place to prevent them—the entire HR industry, for one—failed to act. The reckoning only came when individuals spoke out. 

Such movements can lose steam even as they grow: their targets often learn to appease without enacting real change, and the perception that new standards are being applied too zealously can spark a backlash. 

There’s a real risk that the ESG movement follows suit. Bankers are already warning that products like sustainability-linked loans are losing credibility, and some researchers blame sustainable investing for the recent spike in energy prices.

If investors are truly worried about ESG becoming the corporate finance version of cancel culture, they should up their game. Blacklisting an NSO takes very little work; knowing you did your part to prevent a tragedy like Astroworld demands a lot more.

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