S&P Issues Revised Rating Outlook for Zuffa to Stable from Negative
July 18, 2008
Today S&P issued a revised ratings outlook for Zuffa, parent company of the UFC, affirming its BB- credit rating, while raising its rating outlook to stable from negative.
“The outlook revision reflects improved performance in recent quarters,” according to S&P credit analyst Ben Bubeck. “Specifically, the company’s international operations have been profitable thus far in 2008, following periods of substantial losses in 2007 as the company ramped up its operations in the U.K.”
According to the report, pay-per-view revenues, which represent nearly 75% of Zuffa’s total revenues, have trended up in recent quarters. However, perhaps tellingly, the report notes that is largely due to the increasing number of pay-per-view events, higher pricing, and more favorable pay-per-view contracts, rather than an increase in buys.
The report indicates that Zuffa’s EBITDA margins have been extremely volatile over the past two years, thanks in large part to the company’s aggressive international expansion strategy. However, S&P expects that EBITDA margins will be more consistent moving forward. Despite improved perfomance in recent quarters, the company’s total debt to EBITDA and EBITDA coverage relative to interest remains weak for the BB- rating.
