Details on Zuffa’s New Capital Structure
After consulting a pair of accounting professionals, we now have a better understanding of the actual financial structure in place at Zuffa as detailed in two separate Standard & Poor’s reports released this year. The company has secured two loans, totaling $350 million, which should provide a sound financial footing through at least 2015. Zuffa “will have few external funding requirements in the intermediate term once the new capital structure is implemented.”Zuffa currently has a $350 million senior secured credit facility at its disposal. That number represents a term loan for $325 million due in 2015 and a $25 million revolving credit facility (a so called “revolver”) due in 2013. The company has full availability on its revolver indicating that to this point it has been able to fund operations out of its normal cash flow. As a result the revolver currently represents little more than a rainy day fund. Zuffa’s total debt outstanding as of June 30, 2007 was $325 million.
Proceeds of the term loan were used to pay a one-time special dividend to Zuffa’s owners, the Fertitta brothers (90%) and Dana White (10%), and to refinance the company’s existing debt. We can only speculate about the amount of debt the company refinanced and the amount it paid out in dividends, however, some comments in the S&P reports suggest that the dividend payments could be quite substantial. It is also interesting to note that the term loan was originally proposed at $275 million, as of the May 22 report, only to be increased to $325 million after June 30. This time frame coincides with the closing of Zuffa’s purchase of Pride’s assets. The significance of this increase and its connection to the purchase of Pride is purely speculative.
The loans are secured by bank issued securities as opposed to the company’s assets. The company’s assets are almost entirely composed of their brands, contracts, and cash, with very little in the way of tangible assets. S&P estimates the resale value of the company’s assets, assuming a forced liquidation, at roughly $150-240 million dollars. As a result of these numbers, free cash flow is paramount in the minds of the company’s creditors. The company’s credit rating outlook was cut because of weak free cash flow caused by decreased operating margins. Unless free cash flow improves, the owners will have to cut dividend payments to avoid a cut in their rating.
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Great info, interesting nuggets.
I’m thinking about starting an investment analyst company that covers the fighting industry. Anyone in?
“…Proceeds of the term loan were used to pay a one-time special dividend to Zuffa’s owners, the Fertitta brothers (90%) and Dana White (10%)…”
Now we know who wears the pants in the relationship.
I’m sure when UFC was purchased, White didn’t bring a ton of cash to the table. His was purely sweat equity. But 10 percent isn’t bad once you see the numbers.
Absolutely. The Fertitta’s surely had the deeper pockets but even a 10% stake in the company is massive now.
I didn’t know that Dana White own 10% of Zuffa! I thought he owned maybe a fraction of a percent to maybe a percent or two. I agree Kris that a 10% stake in Zuffa is huge. I didn’t know Dana White was ballin’; good for him. He may not pay his fighters what they deserve, but he does do a very good job with marketing the UFC and helped with making the UFC what it is today.
I “think” Dana wants a bigger share in the company. That “could be” one reason to take a loan out to even up the score with the Fertita’s. I know Dana does most of the foot work for the company, and most of the contractual work (except Tito’s of coarse) All mearly speculation. I totally agree with all of you that Dana probably didn’t bring much to the table financially, and that 10% of a billion is a lot(1 mil to be exact, I’m a friggin genius) I just know Dana has publicly complained (mentioned might be a better way to say it, I don’t know) about how much time he puts into the UFC and I know he travels constantly trying to seal deals, maybe know he does desirve more?.?.?.
Its not worth a billion, but I agree, even 10% of the projected 240 million, which is the top end projected mark for the liquadation of assets, is a ****-ton of money.
Mucho, mucho dinero.
Still, the Ferttita’s own Uncle Fester.
SCOTCHYDOW
“and that 10% of a billion is a lot(1 mil to be exact, I’m a friggin genius)”
Actually 10% of a billion is 100 million. Maybe you should work on your math there genius.
That was a joke on myself because I typed it and realized what I had typed, and decided to clown myself. Hence the “I’m a friggin’ genius” comment. Everybody sure is climbing up my ass this month, what gives.