Tweet
I thought this was fascinating. I know this is UFC stuff, but considering MMA is a competitor to boxing I thought this thread belonged here. It goes to show that the UFC deal was smoke and mirrors.
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.
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.
Comment