UFC is reportedly looking to take on more debt, as Moody’s Investors Service and S&P Global Ratings suggest the organization could add $150 million to its current $2.3 billion loan. Moody’s has judged the loan to be “speculative and a high credit risk.”
The risk comes from a high debt-to-EBITDA ratio, a measurement that is often used to assess the ability of a company to service any debt it holds. UFC’s ratio would be approximately 6.7 with an estimated EBITDA of $350 million in 2019 – typically anything above four or five is considered high. Moody’s warned that UFC’s leverage could increase even further this year with the new loan and with its cash flow expected to decrease because of the pandemic, rising potentially up to eight times EBITDA.
Even without fans for a big chunk of 2020, UFC has been able to increase the cash on the balance sheet, from $151 million in December 2019 to $205 million on May 31. A five-year, $1.2 billion media rights deal with ESPN signed in 2018 will also help UFC shield against some of the debt risk, as will a gradual increase in attendance. UFC was able to resume fights in May, holding events first in Florida and then Las Vegas. It will head to Abu Dhabi for its much-anticipated Fight Island events next month.