Report: bad news for fighters hoping to get their pay raised

FrankieNYC

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From Meltzer's newsletter:

Federal Reserve Bank supervisors sent a caution letter to Goldman Sachs regarding the risks of the $1.825 billion in financing that it took for the recent UFC purchase.

According to a series of Bloomberg articles on the subject, WME IMG needed an additional $1.4 billion past the $2.6 billion they raised through Silver Lake Partners, KKR & C. And Dell Inc. needed to hit the promised $4 billion purchase price, as well as another $425 million to cover the existing debt.

Regulators these days criticized companies that have taken on debt more than six times annual earnings. UFC’s earnings for the first six months of 2016 were down from the same period in 2015. For the period from July 1, 2015 to June 30, 2016, the EBITDA was $142 million, making the company debt is 12.7 times earnings.

The roughly 70 different investors, most of whom jumped at the chance to purchase company debt because of the high interest rate that was offered, mostly being Hedge funds, alternate lenders and mutual funds.

At first, the banks that were trying to sell the debt were skeptical there would be a market for so much debt, but in fact, there was a run on it. The first $500 million in debt offerings sold out immediately and there were $2 billion worth of investment money thrown at it when Goldman Sachs and the new ownership group was offering 8.5 percent annual interest.

The debt was sold to people who were given predictions of $298 million annual EBITDA based on cost cutting (everyone working in the company has been scared to death of that word, and rightly so) and growth in licensing revenue which the new owners are heavily trying to push.

Keep in mind that business was huge from the start of 2015 through the present time, and there was a video game cycle and some of the biggest PPVs the company has ever done. Yet that EBITDA figure is more than double of what the company generated in the last fiscal year.

Granted, the annual numbers will likely look better because the last six months will include UFC 200 and UFC 202, both of which topped 1 million buys by a significant amount, and UFC 205, which should be the biggest show in company history.

But the big profit numbers are also based on being able to top 1 million buys multiple times per year, and that business is largely built on Conor McGregor and Ronda Rousey, because UFC 200 comes around roughly every eight years or so, and the first Madison Square Garden show comes around exactly once in history.

The business has no chance to be anywhere close to that level if both fighters either lose several times to where their drawing power is hurt, or get injured, or both retire. Few expect Rousey to fight much longer. With McGregor who knows what will happen? He’s shown how difficult he is to deal with at this point, basing an entire business around him is not a long-term plan.

Based on that $298 million annual EBITDA, a figure that realistically would need a new and far more lucrative television deal in 2019 to reach, because you can only cut costs so much and PPV revenue is not likely to beat this year’s numbers on an annual basis very often, you do get a six times multiple. But that is a hell of a lot of costs savings, and means the idea that these big PPV numbers will serve to increase fighter pay may not be the case except for the top guys who are contracted for cuts.

But all the debt revenue of $1,825,000,000 was quickly raised through high interest offered, and in fact there was so much demand to get the high interest debut that Goldman Sachs was able to cut the interest.

But that much debt, if the average on it is 7.5 percent interest, that works out to $137 million just in paying interest on the debt. That doesn’t even figure paying back any of the debt, just the annual interest payment.

That means the company won’t make any profit at all unless they top that level of EBITDA. Those huge interest payments are bad news for fighters hoping to get their pay raised with the new owners, and explains why there look to be cost-cutting measures put into place even though the company is booming as a business and hugely profitable like never before.

TLDR:
The new owners need to have bigger years than Zuffa ever had to make money due to the loans & interest involved in purchasing UFC from Zuffa
They had to borrow $1,825,000,000 to buy UFC & Meltzer closed with:
Those huge interest payments are bad news for fighters hoping to get their pay raised with the new owners, and explains why there look to be cost-cutting measures put into place even though the company is booming as a business and hugely profitable like never before.
 
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Good fuck the UFC, I want shit to go back to 2005

We need to undo all the reebok and fox bullshit

I remember UFC cards were like a holiday now none of my friends give a fuck and same here I watch that shit later on rutube
 
I dont think they expect to make that back in the first year. Its a long term investment. They will probably be in the red the first year and they know that. High risk and high reward investment with long term gains. The sport is still growing. Plus I think they have a lot more marketing power than Fertittas can offer. They will be fine as a company. I expect fighter pay to not change much. You eat what kill in this business. Fighters with drawing power will always make the most. Its a sad fact but true. You have to sell as a fighter. You have to sell the fight.
 
Let's hear @UL's analysis of this, seeing as he's the President of the NGO "MeltzerWatch."

Aren't the new owners Jewish?

Obviously the fighters wouldn't be getting any raises if that's the case.

<{anton}>
 
Good fuck the UFC, I want shit to go back to 2005

We need to undo all the reebok and fox bullshit

I remember UFC cards were like a holiday now none of my friends give a fuck and same here I watch that shit later on rutube

And yet UFC is making more money than ever before, certainly way more compared to 2005.

Your so-called friends must all be dirty pirates back in the day, that's why the UFC was making so little back then. Now the casuals who actually support the sport is making it grow.
 
This is good, the UFC is slowly losing its monopoly. I always maintain MMA is best when there are other organizations competing. The UFC will always be #1, but if they go from having 90% of the market share to 70% I am totally fine with that.

The Golden years were when PRIDE, UFC, and Strikeforce were independent .
 
I dont think they expect to make that back in the first year. Its a long term investment. They will probably be in the red the first year and they know that. High risk and high reward investment with long term gains. The sport is still growing.

This...
 
well say goodbye to legitimate matchups and say hello to permanent nonsensical "Money Fights" as well
 
dana_fertitta_lesnar.jpg
 
How the fuck did they convince so many their EBITA would be more than 2X what it ever had been in history?

Investors aren't stupid, there's more to this.
 
You hear that?? Sounds like Renz and uncle Frank are laughing their a$$es off
 
And yet UFC is making more money than ever before, certainly way more compared to 2005.

Your so-called friends must all be dirty pirates back in the day, that's why the UFC was making so little back then. Now the casuals who actually support the sport is making it grow.

Back in 2005 it was harder to find a good stream, and people were a lot less internet savvy.
 
From his newsletter:



TLDR:
The new owners need to have bigger years than Zuffa ever had to make money due to the loans & interest involved in purchasing UFC from Zuffa
They had to borrow $1,825,000,000 to buy UFC & Meltzer closed with:
Those huge interest payments are bad news for fighters hoping to get their pay raised with the new owners, and explains why there look to be cost-cutting measures put into place even though the company is booming as a business and hugely profitable like never before.
I don't give a sh*t about what fighters make tbh nor should anyone
 
Pay increases? They'll cut half the roster if those figures are accurate.

Maybe cut even more. Become top heavy and promote the living shit out of 20 fighters and hope to god they can create stars.

I wish I could have gotten in on that 7.5%. Love me some yield.
 
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