Report: Fed cautioned Goldman Sachs about UFC deal

October 7, 2016

Bloomberg.com reports that the Federal Reserve bank cautioned Goldman Sachs Group, Inc. over debt risks in a deal it arranged to fund the $4 billion purchase of the UFC.

Goldman Sachs was hired to market the debt to purchase the UFC this past July.  Regulators have criticized deals that push a company’s debt load to more than six times its earnings.

“Add-backs,” which estimate a company’s future profitability after an acquisition or buyout were used to double projected cash flow for the UFC.  The concern is that the projections may be too optimistic for the companies that are purchased.  This could lead to a default which is the reason why the Federal Reserve cautions deals where the debt load looks to be more than the projected earnings.

According to the Bloomberg story, prospective investors were shown estimates that EBITDA would more than double from $142M to $298M.  Per the article, the adjustments had the effect of lowering UFC’s leverage to 6 times EBITDA.

The UFC raised a total of $1.8 billion of debt which included $1.4 billion in first lien loans and another $425 million in second lien loans.  Based on the current EBITDA of $142M this would have the company leveraged at approximately 12x EBITDA.

Payout Perspective:

Notably, the Bloomberg report states that the UFC’s EBITDA as of June 30th was $142 million.  A previous SBJ report had the EBITDA at $180 million although that did not have “as of” date.  The obvious goal of the Fed is to reduce the risk of default in acquisitions.  While the deal may never reach critical mass in terms of a default on the debt, the deal is considered high risk.

25 Responses to “Report: Fed cautioned Goldman Sachs about UFC deal”

  1. tops E on October 7th, 2016 11:44 PM

    Its a marketing bubble! Hahahaha high risk indeed

  2. Fight Fan on October 8th, 2016 10:25 AM

    Wow, Dana and the clowns are gonna make out like bandits while the celebrities pay the piper. Talk about a Ponzi scheme

  3. Wil on October 8th, 2016 2:40 PM

    Can you imagine the loss of money if the UFC loses its only star McGregor? Now you understand why these WWE guys, why White wants Rousey back so badly, and why he is also hoping his other blonde/blue eyes Van Zant and Northcutt make it…..without a star, the UFC goes under, especially now that so many are moving to Bellator or threatening so

  4. Combo on October 8th, 2016 3:38 PM

    Lol at the UFC going under. Boxing fans can be so funny, unintentionally.

    The UFC continues to take over, reaching many new milestones, the latest one tonight – the UFC’s first PPV event in England. MSG coming up, etc.

    Meanwhile, NBC has cancelled several PBC shows and Jim Lamprey weighs in on the possibility of Premier Boxing Champions’ demise:

    http://www.latimes.com/sports/boxing/la-sp-sn-boxing-lampley-al-haymon-pbc-hbo-20161006-snap-story.html

  5. Wil on October 8th, 2016 3:52 PM

    with or without PBC, boxing goes on, globally, and fighters will still make millions….came the same be said for a UFC demise? this isnt boxing vs mma, this is reality.

  6. Wil on October 8th, 2016 3:52 PM

    that is the price of a monopoly…

  7. tops E on October 8th, 2016 4:11 PM

    I think boxing record paydays were not on pbc….hahahaha….

  8. E Tops on October 8th, 2016 5:19 PM

    Ufc is on the verge of a billion dollars tv deal in less than two years. I think they will be fine.

    Anything that sell over a billion dollars especially four will be investigated by the feds.

    Come on Wil, the sport and Ufc are bigger than Conor. The most successful ppv year in Ufc was 2010 way before Conor and Rousey. Stars come and go in sports, plus Conor is only 28 and loves money. Lol at Bellator being a threat.

  9. xfcvxzvxcvxcv on October 8th, 2016 6:32 PM

    UFC is safe. Investors will get screwed. If debt load becomes too much, UFC can file Chpt 11. Investors are screwed.

  10. turd on October 9th, 2016 5:27 AM

    ufc has pretty much put boxing in north america on the ropes yes boxing is still big internationally, but no promoter in boxing is making nearly what the ufc does.

    pbc lost 500 million in two years, thats pathetic. of course al haymon made out ok

    with his manager fees

  11. turd on October 9th, 2016 7:22 AM

    there are no huge fights in boxing right now, ggg vs canelo i doubt would sell 1 million but gone are the days of guys like tyson, mayweather, pacquiaou, and delahoya, selling 2 million ppvs

  12. turd on October 9th, 2016 7:22 AM

    there are no huge fights in boxing right now, ggg vs canelo i doubt would sell 1 million but gone are the days of guys like tyson, mayweather, pacquiaou, and delahoya, selling 2 million ppvs

  13. E Tops on October 9th, 2016 9:56 AM

    Wilder/Fury/Joshua combo can sell ppvs but they’re afraid to fight each other.

  14. turd on October 9th, 2016 6:30 PM

    e tops no i dont think it would sell well here, no one knows who wilder is, come on like 300k max watch his fights on showtime plus wilder is content to fight people with no talent.

    joshua is a big draw in england but no way these guys could sell ppv here

  15. Cutch on October 10th, 2016 4:00 AM

    Fury shouldn’t be fighting and will probably get banned for using coke and will be stripped, he’s obviously got huge issues talking about wanting to die, less said about his views on homosexuals the better and other topics.

    Joshua can sell in the UK but the £ has dropped massively against the $ because of the UK’s decision to leave the EU, this will drop even further when they officially leave in a few months. Joshua could also sell in the US if he can firstly get in the country, he was caught drug dealing as a youth and may not get in and if he fights decent fighters will he still run through them?

  16. turd on October 10th, 2016 10:35 AM

    boxing is in very bad shape in north america, hbo has cut there budget to 20 million per year at one time is was 90 million. ppvs dont sell, and ticket sales are not good. i said several times, pacquiao vs mayweather would be the last hurrah

  17. Wil on October 11th, 2016 1:52 AM

    Because you wanted it to be boxings last hurrah. PEople like yourself have morphed the insanely silly “boxing is dead” and “no one watches boxing anymore” (oddly because you want people to stop watching it so that latinos and blacks in the inner city will miraculously start watching mma) to “boxing is in bad shape in north america.”
    Interestingly enough, the highest rated combat sports show of the year was PBCs Spence vs. Bundu, with well over 6m viewers.

  18. Wil on October 11th, 2016 1:53 AM

    and its amazing how an article about the perils of a UFC deal morphed into “boxing is dead”….that shows the highly defensive nature of the “i hate boxing because I love ufc” crowd.

  19. Cutch on October 11th, 2016 7:25 AM

    The highest rated fight because it piggy backed off the Basketball Olympics final, why exactly did the one our gap drop so much? Oh the people must have seen it was Boxing and turned it off, then turned it back on for the closing ceremony?

    The fight was on NBC, they barely show College Football, yet they are worried about competing with it lol and cancelled the fights to next year?

  20. Cutch on October 11th, 2016 7:27 AM

    One hour gap it should be, they only actually aired one fight.

  21. Fight Fan on October 11th, 2016 7:53 AM

    Cutch they could have turned the TV off nobody forced 6 mil to watch, just like 4 million paid to see the biggest fight of all time.

  22. Cutch on October 11th, 2016 8:02 AM

    They could have but most people would just leave it on, 14 million or whatever did turn it off and then back on when the Olympics started again, losing that many viewers is not something to brag about.

  23. fight fan on October 11th, 2016 3:25 PM

    Any ufc events done 6m? I’ll wait

  24. Wil on October 12th, 2016 3:54 AM

    Nope…..not since the mid 2000s

  25. The UFC's Future Isn't As Bright As It Seems - SMC Digital Marketing on October 20th, 2016 3:12 PM

    […] EBITDA value of the UFC – some report it as over $200 million while others report it around $150 million – I am going to defer to Forbes and Bloomberg who both report the EBITDA around $180 […]

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