UFC signs multiyear sponsorship deal with Aurora Cannabis

May 21, 2019

Sports Business Daily reports that the UFC has signed a multiyear sponsorship deal with Aurora Cannabis of Edmonton, Alberta, Canada.

As part of the deal, the parties will pledge fund research on “CBD products and athlete wellness and recovery, with a view to accelerating CBD product development and education.”

The sponsorship will become visible next month at UFC 238 in June.

According to a report from Forbes.com, CBD sales in the U.S. will surpass $20 billion by 2024.

Payout Perspective:

It seems like every fighter on a major MMA podcast pedaled some CBD company and the UFC finally came aboard.  As a growing industry, it is clear that the UFC wanted to take advantage.  As for the research it will do, one may only suggest that it will look into how it will help athletes without altering its current anti-doping policy.  The deal also shows the continued expansion of the UFC sponsorship portfolio as it is signing up more deals for otherwise untapped industries.

UFC Holdings follows market trend of reducing ‘debt cushion’

May 17, 2019

The Wall Street Journal reported late last month that the UFC was paying off its junior loan utilizing a senior one in order to reduce its overall debt load.  The move comes on the heels of an exclusive PPV deal with ESPN and the lack of concern that the Federal Reserve will raise interest rates.  The reduction of ‘debt cushion’ is a market trend by some companies to the chagrin of senior debt holders.

UFC Holdings, the official name of the entity for the UFC, sold $435 million of an add-on to an existing $1.44 billion loan that was due in 2023 and now has been extended to 2026.  The addition to the loan was sold at $99.75 on the dollar which included a discount to where the existing debt traded.  The company also paid existing loan holders a modest fee to allow the transaction.

The new debt will be used to pay off a more junior loan which eliminates a ‘debt cushion’ for senior lenders as junior debt (i.e., bonds and loans) are typically the first pieces of debt to absorb losses in bankruptcy.  Essentially, if the company were to go bankrupt the junior loans would be the most vulnerable in not being paid back as the most senior creditors would have the first chance at the assets which may leave junior debt out of luck in repayment. In this case, the junior loan had a higher interest rate than the senior loan.  The floating interest rate on the junior loan has been the London interbank offered rate plus 7.5%, or 4.25 percentage points higher than the rate on the senior loan.  Thus, the move aids in eliminating interest on the junior debt.

The transaction seems to be a growing trend in debt financing as more companies are reducing ‘debt cushion.’  This occurs in instances of speculative grade loans and instances where the junior loan has a higher interest rate than the senior loan.  To the chagrin of senior debt holders, paying down a junior loan is not favored as one might recognize that paying down a junior debt means that in the worst-case scenario for a senior debt holder, if a bankruptcy were to occur, assets previously used to pay off the junior debt will not be there to pay off the senior debt.

Via WSJ:

Last year, buyers of first-lien loans were paid 0.83 percentage point above the benchmark London interbank offered rate for every multiple the loans exceeded a measure of borrowers’ cash flow, according to LCD. That was the smallest amount since 2007, when lenders were paid just 0.69 percentage point.

Also, according to WSJ, 27% of first-lien loans, mostly held by senior type of debt held by investors were not backed by companies that didn’t have junior outstanding debt.

If you were wondering, this is analogous to using a credit card to pay off one with a higher interest rate.  Using a loan to pay off another might not seem like the most financially secure way to address debt load issues for a company and concerns senior debtholders that hold priority over the junior debtholders.  But a number of factors (as outlined above) likely made this move prudent.  First, Disney’s 7-year agreement to pay a “fixed license fee” to air its PPV fights exclusively in North America was seen as to “dramatically reduce the volatility” of UFC’s business.  Secondly, the market to purchase debt is on an uptick.

Here’s another reason that reducing debt cushion is a thing.  According to Moody’s, the company’s debt to EBITDA would fall to 5.5 times from 7.8 times which is said to potentially put lenders in a stronger position even without a debt cushion.  UFC Holdings’ existing loans in 2016 were said to have an EBITDA of $170 million by one measure and $300 million by another which was based on speculative future TV revenue.  Regardless, it borrowed another $100 million in 2017.

Of course, we may now know a little more about the TV revenue since its deal with ESPN.  Moreover, the deal likely assuages lenders about the debt.  Essentially, the speculative nature of the deal became less speculative.

The move pays off the interest rate of the junior debt but senior debt holders are weary as there is potential for not being made whole at the end.  But, it lowers its overall multiple which would allow it to be more lucid in investing and future debt restructuring.

UFC 237 Prelims draw 813,000 viewers as lead-in for Top Rank Boxing which drew 740,000

May 14, 2019

The UFC 237 PPV Prelims on ESPN drew 813,000 viewers according to Nielsen via ShowBuzz Daily.

The event featured BJ Penn-Clay Guida at the top of the telecast and ended with Ryan Spann’s KO of Antonio Rogerio Nogueria.  UFC 237 took place at Rio de Janeiro Brazil.

The event drew 425,000 viewers in the A18-49 demo and a 0.53 share.

It’s interesting to note that the UFC served as the lead-in to Top Rank Boxing on ESPN which drew 740,000 viewers and 354,000 in the A18-49 demo.  The event from Tucson, Arizona featured Miguel Berchelt as he took on Francisco Vargas.

Payout Perspective:

It was a busy night of combat sports and its interesting to see that the viewing audience really stayed on the channel as there was little dropoff from the UFC as the ‘lead-in’ into Top Rank Boxing which lost out on less than 100,000 viewers.

UFC 237 attendance and bonuses

May 13, 2019

UFC 237 took place Saturday night in Brazil with Jessica Andrade coming away as the big winner as the new women’s bantamweight champion as well as earning two bonuses.

Andrade’s slam on Rose Namajunas earned her a Performance Bonus.  She also drew another $50,000 bonus for Fight of the Night.  Receiving the other bonus of the night was Warlly Alves as he KO’d Sergio Moraes.

The event drew 15,193 fans at the Jeunesse Arena in Rio de Janeiro, Brazil. As with most Brazilian UFC events, no gate was announced.

Payout Perspective:

In addition to the main event and Alves, I’d have to say that the Early Prelims were equally entertaining with impressive wins by Raoni Barcelos and Viviane Araujo as well as a FOTN candidate between flyweights Luana Carolina and Priscilla Cachoeira.  The last UFC PPV from Rio was the Amanda Nunes-Raquel Pennington event from May 2018 which drew 10,696.

Cerrone-Ferguson slated for UFC 238 in Chicago

May 10, 2019

ESPN reports that Donald Cerrone will get a quick turnaround fight as he welcomes back Tony Ferguson for next month’s UFC PPV from Chicago.

Cerrone defeated Al Iaquinta in a 5 round main event in Ottawa last week while Ferguson has been on the sidelines since a TKO victory over Anthony Pettis at UFC 229 in October.  Personal issues have sidelined Ferguson as his wife had filed a temporary restraining order against him concerned for the family’s safety including the fighter but it was dropped late last month.  The UFC has indicated that it is providing Ferguson with the assistance he needs to deal with the personal issues.  The two are scheduled to meet at UFC 238 at the United Center in Chicago.

The current headliner for that event is Henry Cejudo taking on Marlon Moraes for the Bantamweight title.  Also, Valentina Shevchenko is set to defend her Flyweight title against Jessica Eye.

Payout Perspective:

Hopefully Ferguson has been able to address the issues he had this past winter and is able to focus on getting back into the Octagon. The Cerrone fight presents a very intriguing fight that many may lobby should be the main event of the evening.  Certainly, it does overshadow both championship fights but also boosts the interest level of this PPV.

 

Monster Energy drops Dillashaw

May 9, 2019

Monster Energy has cut ties with former UFC bantamweight champion T.J. Dillashaw as the energy drink company is no longer a sponsor of the fighter.

Ariel Helwani first reported the business decision by the Orange County-based company.  Dillashaw is serving a two-year suspension from the UFC after USADA tests discovered EPO in drug tests.  Dillashaw did not appeal the ruling and in an Instagram post expressed regret for his mistake.

Monster Energy, a UFC sponsor, also has individual deals with several UFC and Bellator fighters including Jon Jones, Donald Cerrone, Joe Schilling and Rory MacDonald.

Payout Perspective:

Despite Jones’ past issues with USADA, Monster has not flinched with its support of Jones.  Of course, Dillashaw was found guilty of using EPO which many consider is worse than Jones’ past USADA indiscretions.  The business move makes sense considering Dillashaw’s brand needs some repair and time away from the spotlight may rehabilitate him.  So, it would make no sense for Monster Energy to continue to sponsor a fighter on the sidelines.

UFC on ESPN + 9 attendance, gate and bonuses

May 5, 2019

UFC on ESPN +9 took place in Ottawa, Ontario, Canada on Saturday night. Once again, Donald Cerrone drew another bonus for his performance in defeating Al Iaquinta in the main event.

Cerrone and Iaquinta drew Fight of the Night honors while Walt Harris and Macy Chiasson earned Performance Bonuses for their stoppages on Saturday.

The event drew 10,960 fans for $807,000 U.S. Dollars according to the UFC post-event. The event took place from the Canadian Tire Centre in Ottawa, Ontario, Canada.

Payout Perspective:

The event attendance rivals that of the UFC’s last visit to Ottawa in June 2016. The Canadian fans showed up once again for this Fight Night-level card. This event showed that Cerrone is ready for a top-notch main event and could be in line for Conor McGregor next.

USADA cancels the rest of Amanda Ribas’ suspension for ostarine

May 3, 2019

In an interesting turn of events, USADA has granted a reduction of sanction of Amanda Ribas’ period of ineligibility due to a finding of ostarine in a drug test. She is now allowed to return to fight for the promotion.

Ribas tested positive for ostarine on June 7, 2017.  The Brazilian had been serving a two-year sanction.  But Friday’s news eliminates a further sanction for the women’s strawweight.

“USADA believes it is fair to allow Ribas to return to competition after serving the majority of her two-year sanction,” it announced in a standard release.

A key passage in USADA’s release states:

The termination of Ribas’ sanction reflects USADA’s recognition of the demonstrated prevalence of ostarine in a wide range of supplement products used by athletes (see USADA High Risk List for more than 70 products) and that ostarine has frequently been found as a product contaminant. The trace amounts of ostarine found in Ribas’ sample was made possible by sensitive laboratory detection capabilities and has been followed by four negative tests. As Ribas was unable to identify the source of her positive test, and taking into consideration the likelihood that her positive test was the result of an ostarine contaminated dietary supplement product, USADA believes it is fair to allow Ribas to return to competition after serving the majority of her two-year sanction.

Ribas’ reduction in sanction comes right after USADA reduced suspensions for tainted supplements of four fighters.

Payout Perspective:

This is a pretty big deal as USADA has never revisited a previous violation.  Also, this brings up the issue with prior fighter sanctions and whether reparations should be in order for those that have served suspensions without USADA revisiting their case.  The overarching standard is that the athlete is responsible for what they ingest.  Even if the athlete ingests a contaminated supplement, they are subject to the mandatory two-year suspension.  Recently, it appears that USADA is softening its stance on the hardline mandatory two-years with some, like Walt Harris receiving just 4 months.  Even Harris has threatened legal action due to the sanction as his test was due to a contaminated supplement.

It appears that UFC Anti-Doping Program is transitioning into assessing the issue with contaminated supplements.  While this may be an added improvement, the refrain from fighters scarred by the previous program will be a public relations issue.

UFC goes with DC-Miocic after Lesnar drops out

May 2, 2019

The UFC has pivoted away from a Brock Lesnar-Daniel Cormier clash in favor of a rematch with Stipe Miocic.

Cormier defeated Miocic last July to win the UFC Heavyweight Championship.  At the time, it made him a double champion as he held the Light Heavyweight Championship at the time.  Last year, Cormier and Lesnar got into a post-fight Octagon confrontation which likely meant that the two would fight down the road.  However, that did not come to pass.

According to Dave Meltzer of The Wrestling Observer, Lesnar wanted a flat fee from the UFC in lieu of the traditional PPV upside since its new partner for PPV is exclusively ESPN+ in the United States.  One may infer that Lesnar’s ask was too high for the UFC as they passed on Lesnar and decided to go with the Cormier-Stipe matchup in August.

The last we saw Lesnar, he opened Wrestlemania with a loss and the inference that he was heading to the U FC.  It appears that WWE may have him back for the company.

Payout Perspective:

This is likely the best for all parties.  Lesnar is a shrewd businessperson and is not afraid to walk if he does not receive what he wants.  Despite the anticipated mainstream publicity and buys due to Lesnar’s name and status, its likely that the Miocic-Cormier matchup would produce more of an uncertain income.  While Lesnar was a star years ago in the UFC, his last fight at UFC 200 was marred due to a failed drug test.  Prior to that, he suffered from diverticulitis which led to losses to Alistair Overeem and Cain Velasquez.  In his early 40s, Lesnar would likely be taken out by the 40-year-old Cormier.  Although Cormier, KO’d Miocic, he was the previous Heavyweight Champion and will finally get his return fight.

Harris threatens lawsuit against supplement maker/distributor after serving USADA suspension

May 2, 2019

UFC Heavyweight Walt Harris states that he will take legal action against the maker and distributor of a supplement that caused him to be suspended per the UFC Anti-Doping Policy.

A win over Andrei Arlovski was overturned due to the failed USADA test.  It was discovered that a supplement he ingested was tainted with the anabolic agent LGD-4033.

Harris, speaking to reporters this week ahead of his upcoming fight against Sergey Spivak, he indicated that he was upset about his reputation being damaged.  Issues of jurisdiction remain a question prior to filing of Harris’ lawsuit according to his representatives.

In recent memory, Lyman Good and Tim Means have filed lawsuits against supplement makers and distributors based on their USADA suspensions.  Both cases are still pending New York and New Mexico respectively.

USADA had reduced its mandatory two-year sentence for a first offense to four months due to mitigating circumstances as Harris worked with USADA and was able to pinpoint the supplement which caused the issue. It was Harris’ first offense.

Payout Perspective:

While Harris may have viable claims, the question will be whether he will want to endure the time and cost it will take for him to go through a lawsuit.  Also, is he willing to disclose information about his earnings to recover damages and restore his name?  Harris received just a 4-month suspension and had his win reversed to a no-contest. Damages may be minimal as opposed to the legal costs involved.  MMA Payout will keep you posted.

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