Federal Reserve cautions Goldman Sachs financing UFC debt in sale
The financial red tape surrounding the late summer sale of the UFC has raised the Federal Reserve's proverbial eyebrows.
The bank's supervisors have cautioned Goldman Sachs regarding the hefty $1.8-billion debt WME-IMG incurred in purchasing the promotion from the Fertitta brood.
The warning stems from the UFC's debt exceeding its earnings before interest, tax, depreciation, and amortization (EBITDA) more than six times over. Contrary to the bank's concern, investors jumped at the opportunity to take on the debt after being assured the UFC's yearly EBITDA would double thanks to an alleged plan to cut costs, and a promising projected increase in licensing revenue, especially once the FOX deal expires in 2019.
According to MMAFighting's Dave Meltzer, $1.4 billion of the debt was raised in before the sale to boost the appraised bid to $4 billion, while the remaining $425 million accounts for the promotion's existing debt. The report further states when $500 million of the debt went up for grabs, the reportedly favorable 8.5% interest rate prompted a bidding war between as many as 70 investors. The race allowed the promotion to lower interest rates and still attain the $4-billion mark.
If accurate, the UFC's projections would bring its debit within six times its EBITDA, meaning UFC fighters should start tightening their belts.