Makhachev cleared of wrongdoing by USADA after flagged test

July 27, 2016

UFC lightweight Islam Makhachev was cleared of any fault or negligence in connection with a flagged USADA drug test which found the banned substance meldonium in his system.

Makhachev was pulled from his fight with Drew Drober this past April at UFC on Fox 19.  Makhachev will not face any further penalty or suspension from the test.

USADA stated that “Makhachev underwent a radiofrequency ablation procedure for frequent ventricular arrhythmia in December of 2014.”  It was suggested by his doctor that Makhachev “incorporate meldonium, a non-prescription medication, into his follow-up treatment plan and as a preventative measure against a potential relapse.”  Makhachev took meldonium for four weeks which ended in December 2015.  Yet, it was still found in his sample in April 2016.

Via UFC-USADA web site:

USADA confirmed that Makhachev discontinued use of the substance prior to January 1, 2016, because he was aware that the substance would be added to the WADA Prohibited List and banned under the UFC Anti-Doping Program.

After a thorough review of the case, USADA concluded that the extremely low meldonium concentration in the athlete’s urine sample, combined with the athlete’s explanation of use, was consistent with ingestion prior to the substance being officially prohibited on January 1, 2016. Based on the latest guidance offered by WADA on June 30, 2016, for cases involving meldonium, Makhachev will not face a period of ineligibility for his positive test.

Meldonium was added to the banned list of substances in January 2016.  Notably, women’s tennis star, Maria Sharapova was found to have taken the banned substance.  She received a two-year suspension from the International Tennis Federation (ITF).

Payout Perspective:

This finding may help other athletes that have used meldonium in the past.  Unfortunately for Makhachev, despite doing everything correct, he lost out on his fight and the payout.

UFC renews broadcast deal with BT Sport

July 27, 2016

UFC has renewed its broadcast rights partnership with United Kingdom and Ireland provider BT Sport per press release.

The deal allows for BT Sport to the exclusive right to air live UFC events throughout the UK and the Republic of Ireland.  The deal allows for BT Sport to show over 150 hours of live UFC coverage including all of the numbered UFC PPVs and all EMEA (Europe, Middle East and Africa) events.  Terms of the deal were not disclosed although the deal will run through 2018.

According to the Daily Mirror, there was some competition for the UFC rights deal with Sky.

Payout Perspective:

The timing comes prior to the big Conor McGregor-Nate Diaz rematch at UFC 202 which should garner a lot of viewers in the UK and Ireland due to Conor.  The deal solidifies the UFC’s broadcast deal in an area with which they hope to grow with the new ownership.

UFC on Fox 20 peaks at 4.687M viewers

July 26, 2016

The UFC on Fox 20 ratings were the highest ever for a summer event on the network.  The last three rounds of the Holly Holm-Valentina Shevchenko main event drew 4,687,000 viewers making it the fifth-best fight since the UFC aired on Fox.

The show drew 2,975,000 viewers and a 1.8 rating.  This shows a nice increase from its 2,440,000 viewers in overnight ratings.  Those ratings did not account for the overrun.

July’s show on Fox was up 29% from April’s Fox card.

Preceding the event, the UFC Fight Night Prelims averaged 1.261 million viewers from the 6-8pm ET time slot on Fox.

Also, the UFC Fight Night Post-Fight Show on FS1 drew 222,000 viewers.

UFC on Fox Ratings
Overnights Live + SD
UFC on Fox 1 5,700,000
UFC on Fox 2 4,570,000
UFC on Fox 3 2,250,000 2,400,000
UFC on Fox 4 2,360,000 2,400,000
UFC on Fox 5 3,410,000 4,400,000
UFC on Fox 6 3,770,000 4,220,000
UFC on Fox 7 3,300,000 3,700,000
UFC on Fox 8 2,040,000 2,380,000
UFC on Fox 9 2,410,000 2,800,000
UFC on Fox 10 2,550,000 3,220,000
UFC on Fox 11 1,990,000 2,500,000
UFC on Fox 12 2,020,000 2,500,000
UFC on Fox 13 2,270,000 2,800,000
UFC on Fox 14 2,820,000 3,049,000
UFC on Fox 15 2,430,000 2,745,000
UFC on Fox 16 2,290,000 2,800,000
UFC on Fox 17 2,280,000 2,781,000
UFC on Fox 18 2,430,000 2,685,000
UFC on Fox 19 2,130,000 2,500,000
UFC on Fox 20 2,440,000 2,975,000

UFC on Fox 20 Ratings

Payout Perspective:

Holly Holm’s popularity appears to have carried the show.  Per Fox, the Albuquerque market drew an 8.8 rating in the adult 18-49 demo and an 18 share.  Over 4.5 million viewers tuned in to watch Holm battle Shevchenko in the main event.  The ratings is a good sign that the casual fan has warmed up to women’s MMA and that the summer UFC show on Fox can draw ratings.

Moody’s details UFC Holdings, LLC acquisition

July 26, 2016

In a press release sent out last week, Standard & Poor’s Global assigned a rating for the debt involved in the acquisition of the UFC by a group led by WME-IMG.  Moody’s Investor Service has sent out its own press release with more details related to the leveraged debt in the acquisition.

Per the July 22, 2016 release, Moody’s assigned VGD Merger Sub, LLC (aka UFC Holdings, LLC) a B2 corporate family rating and the proposed $150 million revolver and $1,300 million first lien term loan a B1 rating.  The rating is assigned to those investments with a high credit risk and are based on speculation.  The outlook, per Moody’s is seen as stable.

While Moody’s has a pretty optimistic outlook on the future of the company, it will not adjust the rating any time soon until the debt leverage is reduced.

UFC Holdings, LLC will be the rated entity after the transaction is complete.  The Moody’s release broke down the money covered in this transaction:

  • $1,420 million in new equity
  • $325 million in rollover equity from management and existing investors
  • $400 million of preferred equity
  • $1,300 million in new first lien term loans
  • $500 million second lien term loans or unsecured debt.

When the company determines if the $500 million will be in the form of a second lien term loan or an unsecured note, Moody’s will assign a rating to the debt offering.

Moody’s expects that the UFC will maintain a “good liquidity profile over the next twelve months with an expected cash balance of about $30 million following the close of the transaction and an undrawn $150 million revolving credit facility due 2021.”

Similar to the Standard & Poor’s projections, Moody’s cites the upcoming rights fee agreement as a positive for the company when considering its prospective business outlook.  Despite the high debt, analysts believe that this shall contribute to an ascending EBITDA.

Also to note from Moody’s:

WME Parent is subject to a $175 million contingent acquisition payment upon the achievement of $275 million in EBITDA (but not earlier than June 30, 2017) and $75 million payable upon achieving $350 million of LTM EBITDA (but not earlier than December 31st 2018).

The stable outlook reflects Moody’s expectation that UFC’s EBITDA will continue to improve following a strong year in 2015 driven by PPV revenues, increased digital revenues, and contractual domestic and international television rights fees. While leverage is very high, we expect it to decline below 7x by the end of 2018.

The report warns of a possible downgrade if leverage is not below 7x by the end of 2018.  It also states that there would be negative rating pressure if fee cash flow is used for returns to equity holders instead of debt repayment.

Payout Perspective:

The report notes that the legalization of MMA in New York and the success of UFC Fight Pass improved the outlook for the company.  The fact that the UFC is the largest MMA organization in the sport is a positive for analysts that see “high barriers to entry” to competition.  It also cites a strong brand and “its large contractually bound pool of fighters with superior opportunities for exposure and profit.”  The report also notes that the UFC has mitigated its concern over injured fighters which caused a downturn in PPV revenues in 2014.  Overall, despite the amount of debt used to purchase the UFC, it is seen as a good prospective purchase with the belief that the company will continue with its improving revenues.

UFC on Fox 20 draws 2.44M viewers in overnight ratings

July 24, 2016

UFC on Fox 20 drew 2.44 million viewers in overnight ratings per Television By Numbers.  Its strong showing helped Fox win the night in network ratings.

Per TV By Numbers it drew a 0.9 rating and 4 share in the adult 18-49 demo.  UFC on Fox 20 went up against The Bourne Identity on NBC, 20/20 on ABC and Angel from Hell on CBS.  Although The Bourne Identity drew more viewers (2.93M) and 20/20 drew more in the 9-10pm block (2.98M), its strong showing in the adult 18-49 demo won the night for the network.

The event improved on last year’s overnight rating as UFC on Fox 16 drew 2.29M viewers and improved to 2.8M in Live + SD ratings.  2014’s July show on Fox drew 2M viewers and ended up with 2.5M viewers.

UFC on Fox 20

The event was headlined by Holly Holm taking on Valentina Shevchenko in a women’s bantamweight matchup.

UFC on Fox Ratings
Overnights Live + SD
UFC on Fox 1 5,700,000
UFC on Fox 2 4,570,000
UFC on Fox 3 2,250,000 2,400,000
UFC on Fox 4 2,360,000 2,400,000
UFC on Fox 5 3,410,000 4,400,000
UFC on Fox 6 3,770,000 4,220,000
UFC on Fox 7 3,300,000 3,700,000
UFC on Fox 8 2,040,000 2,380,000
UFC on Fox 9 2,410,000 2,800,000
UFC on Fox 10 2,550,000 3,220,000
UFC on Fox 11 1,990,000 2,500,000
UFC on Fox 12 2,020,000 2,500,000
UFC on Fox 13 2,270,000 2,800,000
UFC on Fox 14 2,820,000 3,049,000
UFC on Fox 15 2,430,000 2,745,000
UFC on Fox 16 2,290,000 2,800,000
UFC on Fox 17 2,280,000 2,781,000
UFC on Fox 18 2,430,000 2,685,000
UFC on Fox 19 2,130,000 2,500,000
UFC on Fox 20 2,440,000

 

UFC on Fox 20 attendance, gate and bonuses

July 23, 2016

UFC on Fox 20 held another event in Chicago Saturday night.  The bonuses included Eddie Wineland, Felice Herrig, Jason Knight and Jim Alers.

In addition to the bonuses, UFC on Fox 20 at the United Center drew 10,287 for a live gate of $1 million.  The attendance and gate were announced at the post-fight press conference.

Wineland and Herrig drew the Performances of the Night while Knight and Alers drew the Fight of the Night.  All earned $50,000 bonuses.

The event ranked fourth out of 5 events at the United Center in Chicago.

  1. UFC on Fox 2: 17,245, $1,270,960 gate
  2. UFC on Fox 6: 16,091, $1,270,000 gate
  3. UFC on Fox 16: 11,663, $1,200,000 gate
  4. UFC on Fox 20: 10,287, $1,000,000 gate
  5. UFC on Fox 10: 10,895, $863,655 gate

Payout Perspective:

A $1 million gate is very good for this event considering that the co-main of Anthony Johnson and Glover Teixeira was pulled off the card leaving Holm as your real main attraction.  The bonuses were fair although I thought that they could have given a bonus to Francis Ngannou.

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.

Sullivan pulled from UFC on Fox 20 for “potential compliance issue”

July 22, 2016

USADA has flagged George Sullivan for a “potential compliance issue” with the UFC’s anti-doping policy stemming from “voluntarily disclosed information” Sullivan provided to USADA.  Due to this issue, Sullivan has been removed from his fight with Hector Urbina from the UFC on Fox 20 card this Saturday.

Sullivan denies the issue on his Facebook page.

As anyone that knows me or follows me on social media is aware, I am an outspoken advocate for keeping MMA clean of PEDs. I was shocked when I was told that I could not fight this weekend. I did not fail a test. I was pulled from the card due to a natural supplement being on my list of supplements that I voluntarily disclosed to USADA. This supplement has been on my list that I have disclosed to both the UFC and USADA prior to my previous fights. I have been tested for PEDs countless times in my career by different testing authorities, including USADA. I have never tested positive for any banned substances. I want to thank everyone that supports me. I plan to do whatever it takes to clear my name. I am confident that my name will be cleared.

The UFC has issued a statement on Sullivan:

UFC competitor George Sullivan voluntarily disclosed information to the U.S. Anti-Doping Agency (USADA) that could pose a potential compliance issue with the UFC Anti-Doping Policy. Out of an abundance of caution, Sullivan has been removed from his scheduled bout on Saturday night against Hector Urbina while USADA conducts an investigation into the matter.

Urbina will still weigh in as a potential backup opponent should there be a need for him to compete in another bout on Saturday. Otherwise, he will be re-booked for another card in the near future.

Payout Perspective:

Unlike most UFC anti-doping infractions, it appears that Sullivan did not fail a test but a supplement he listed on his pre-fight questionnaire is at question.  Should Sullivan have been pulled from his fight if it was a “potential compliance issue” and not related to a test USADA flagged.  This is disappointing for Sullivan and his opponent Urbina who most likely will go without a fight Saturday and may, at best, receive his show money.

SBJ provides details of UFC deal

July 21, 2016

The Sports Business Journal took a deep dive into the UFC’s sale to WME-IMG.  The article looks into the revenue drivers that had the acquisition price of $4 billion.

The purchase price of $4 billion represents a 22 multiple of the UFC’s earnings before interest, taxes, depreciation and amortization.  On $600 million in gross revenue from 2015, UFC’s EBITDA is $180 million.  $180m x 22 =$3.96 billion.  The hope is that with a new media rights deal, the multiple will lower to 13-14 range which would make it a much better purchase.

Media rights, according to the UFC, could grow to $115 million per year to an average annual payout of more than $400 million starting in 2019.

The media rights do not contemplate PPV or UFC Fight Pass revenue.  The UFC is set to start renegotiating in 2018 and believes it will have some leverage as other sports media rights deals run into 2020s.

The other revelation from the SBJ article is that ESPN, Fox and Time Warner all considered purchasing the UFC.  The other potential purchasers included China Media Capital and Dalian Wanda Group.

But the concern from the potential buyers was that pay-TV distributors would not feel compelled to increase their affiliate fees which would generate the profit for media companies.

Yet, the UFC was an attractive acquisition here because of its media rights, it owns all of its content and the belief that they can build out the company’s “sponsorship sales and other content opportunities.”  So while there is speculation as to whether distributors would facilitate an increase in fees, the opportunity to utilize the UFC’s assets were too good to pass up.

In order to make the acquisition, there is a plan in place to borrow a big portion of the money as part of the acquisition.

According to the Sports Business Journal.  Currently, the UFC has approximately $500 million of debt that will be retired as part of the $4 billion acquisition.

Payout Perspective:

The article is a very thorough, detailed analysis of the deal.  There is speculation that the deal might sour fall through due to the recent bad press concerning Brock Lesnar and Jon Jones.  But, I would think that it might be posturing to obtain favorable concessions rather than actually backing out of the deal.  The financing involves higher risk, higher interest bonds which is likely due to a number of factors involving the company’s current finances as well as the way WME-IMG would like to structure the deal.

Mendes suspended 2 years by USADA

July 20, 2016

USADA has handed UFC Featherweight Chad Mendes a 2 year suspension for violation of the UFC Anti-Doping Policy.  It is the longest penalty issued by USADA since the policy was introduced last July.

Mendes admitted to his positive test but this did nothing to mitigate circumstances.  He was flagged in June for a May out-of-competition test.

Via UFC-USADA web site:

Mendes, 31, tested positive for GHRP-6 (Growth Hormone-Releasing Hexapeptide) following an out-of-competition urine test conducted on May 17, 2016. GHRP-6 is a prohibited substance in the class of Peptide Hormones, Growth Factors, Related Substances and Mimetics under the UFC Anti-Doping Policy, which has adopted the World Anti-Doping Agency (WADA) Prohibited List.

Payout Perspective:

While USADA has suspended other fighters for violations of the UFC Anti-Doping Policy, this is the first official suspension pursuant to its standard sanctions.  A little over a year ago Mendes was in the company’s biggest event of the year against Conor McGregor.  He has no career for the next two years.  The penalty reflects the harshness of the new drug testing policy and should serve as notice for others.

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