Report: Zuffa obtains new loan, 2nd Quarter earnings over $700M

September 11, 2019

Reuters reports that Zuffa will be adding a $465M loan to its existing $1.875 billion loan as the company has benefited from its media rights deal with ESPN.  Per Moody’s, revenues as of the second quarter of 2019 have the company clearing over $700 million.

The boon for the UFC comes from its expanded media rights deal with  ESPN which began in May 2018 and expanded in March 2019 with the digital platform being the exclusive provider of UFC PPVs.

The add-on loan will be tacked on to the Zuffa’s existing $1.875 billion term loan B that is set to mature in 2026.  The additional money will provide the company with additional cash flow.  Moody’s reports that “$80 million of cash from the balance sheet are expected to be used to fully redeem the preferred equity outstanding and pay transaction related expenses.”  It also shows investors that the company is moving in the right direction.  With UFC 242 this past Saturday, there are continued talks of the company holding more events in the region which is fertile ground for the promotion.

According to the report, the UFC will have roughly 70% of contractually-fixed pro forma revenue from its media rights deal this year which is up from an earlier forecasted 40%.

Goldman Sachs will be underwriting the latest loan and will be offering the same terms as the original debt.  Per the report, “325bp over Libor, with a 1% Libor floor, and a discount of 99.5-99.75 cents.”

According to a Moody’s report, the additional loan will not affect the existing loan’s B2 rating.

Payout Perspective:

The UFC partnering with Disney-owned ESPN has been the right move for the company as the revenues for the promotion are up.  For ESPN, having the UFC on its digital platform has helped with content and boosted its subscriber base.  The additional loan and its rating reflect the credibility of the company and its ability to obtain favorable debt based on the prospects of its business.

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