03-21-2020, 09:05 AM #1
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Endeavor, UFC and Bellator parent company face financial pressure due to high debt during coronavirus outbreak
Ari Emanuel (pictured, right) | Esther Lin, MMA Fighting Endeavor—the parent company of the UFC—is facing potential fallout from the ongoing coronavirus outbreak effectively shutting down the sports and entertainment industries.
S&P Global revealed a list of 107 companies this week including Endeavor and the UFC that were put on a negative credit watch or downgraded since the global pandemic first started. ViacomCBS, the parent company to Bellator MMA was also among the companies listed.
According to the report via Deadline, S&P placed Endeavor and the UFC on “CreditWatch” with negative implications due to the potential drop in revenue due to the companies suffering major losses during the coronavirus outbreak. If Endeavor receives a downgrade in its credit rating, it would make it that much harder for the powerful talent agency-turned-entertainment giant to refinance existing debt as well as slow down the potential for more acquisitions.
Endeavor took on a mountain of debt over the past few years with several high profile acquisitions — none bigger than paying over $4 billion to purchase a majority stake in the UFC. That said, the UFC has been a lifeline as Endeavor’s most successful business but even that is taking a hit now with the mixed martial arts promotion going on hiatus with three upcoming cards cancelled due to the coronavirus outbreak.
“The leisure and entertainment economy is currently disproportionately hurt by fears of public gatherings,” S&P said on Wednesday. “Endeavor owns, operates, or represents a number of events and entertainment properties, including Professional Bull Riders, Fashion Week, Fortnite competitions, and several European soccer leagues.”
According to S&P, the events promoted by Endeavor make up about half of their total revenue and that is “sensitive to consumer demand for out-of-home entertainment, as well as sponsorship and advertising.”
While Endeavor continues to take a hit with almost every other business the company owns, it turns out the UFC might be the savior to keep everything afloat until the coronavirus crisis comes to an end.
S&P stated that the UFC is “strategically important to Endeavor” and the two companies could provide temporary liquidity to help support each other during this ongoing situation. Just recently, $300 million in dividends were cashed out for payments to be made to the UFC owners including Endeavor with $129 million already paid out.
The UFC’s media rights deal, which includes a partnership with ESPN worth more than $750 million, could help stave off further financial risk depending on how long the coronavirus outbreak continues to shut down live events and mass gatherings across the United States.
Endeavor had originally hoped to pay down a significant amount of debt by taking the company public last year but the company cancelled those plans just days before an initial public offering due to concerns of a potentially mediocre stock price.
The UFC has been determined to soldier on with shows despite growing concerns over the spread of the disease. While the promotion did cancel three upcoming cards, UFC president Dana White has stated emphatically that the company will move forward with plans for UFC 249, which is scheduled to take place on April 18.
ViacomCBS also faces issues moving forward after S&P issued concerns about parent company National Amusements by putting them on negative credit watch after shares were trading so low that the company was in technical default on bank loans.