UFC Holdings, LLC issues credit facility, given ‘B’ rating, outlook ‘negative’ per S&P Global

July 23, 2016

Per a Standard & Poor’s Global press release Friday UFC Holdings, LLC will issue a $1.45 billion first lien credit facility.  The company was assigned a ‘B’ rating on the WME-IMG acquisition.  The outlook is projected as negative per the Standard & Poor’s Global Ratings report.

The financing for the deal to acquire the UFC will consist of the $1.45 billion credit facility which will consist of a $150 million revolver due 2021 and a $1.3 billion term loan B due 2023.

S&P Global Ratings assigned its ‘B’ corporate credit rating to UFC Holdings, LLC.  It issued a ‘B+’ issue-level rating to the company’s $1.45 billion credit facility.

The negative outlook reflects significant leverage with the UFC which is based on EBITDA growth to reduce leverage over the next few years (i.e., revenue is predicted to grow to offset the debt load currently taken on).

Recognizing that the revenue from its events fluctuate throughout the yar, the rating is given to ensure the “UFC can reduce total lease and preferred stock-adjusted debt to EBITDA to below 8x” before revising the outlook to stable.

Per S&P Global Ratings credit analyst Emile Courtney, “The ‘B’ corporate credit rating reflects very high anticipated adjusted leverage to complete the acquisition, partly offset by good EBITDA coverage of cash interest expense and an adequate liquidity profile.”

Analysts believe that the company’s EBITDA has a “plausible and robust growth path.”  Similar to the SBJ article, the belief is that future media rights revenue will increase with the next television deal.

Notably, the opinion of analysts is that “the risk of marquee fighter injuries, which caused a significant more than 40% decline in EBITDA in 2014, will likely be partially mitigated in future periods due to “a strategy of marketing multiple fights at events and planning back-up matches and fighters in the event of injuries…”  The report also states that “remedial training and safety actions” have taken place so that less injuries occur.

Payout Perspective:

The report essentially rates UFC Holdings, LLC the way it does because the acquisition by WME-IMG is predicated on loans and the speculation that the UFC revenue (which remains volatile, yet optimistic) will increase.  What is interesting is that the report is bullish on UFC events.  While the volatility of the events (i.e., injuries causing cards to change or fights cancelled) have been a concern with its credit rating in the past, this report implies that the UFC has changed its strategy by promoting multiple fights on a card as well as promoting more safety precautions in training.  The UFC has invested in helping fighters train smarter.  Despite the need to shift fights due to injuries (and now USADA flagging fighters), the report seems to believe that it has improved upon making changes last minute.  The underlying notion here is that the UFC brand is much stronger than the individual fighters.

One Response to “UFC Holdings, LLC issues credit facility, given ‘B’ rating, outlook ‘negative’ per S&P Global”

  1. tops E on July 23rd, 2016 11:13 AM

    Was this done before the 200 ped fiasco? Hahaha…testing positive would be the same as with injuries…also mcgregor being bigger than 200 shows its the individual fighter bigger than the brand

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