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2/21/14 10:45 PM
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Se7enout
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Found this on another MMA forum.. Happy reading!

 

TL : DR - For those who think the UFC is rolling in dough and so safe now that they should be throwing more and more money at the fighters as there is no risk, the debt auditors strongly suggest otherwise.
 
 
 
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Zuffa sits on about $500M of debt. From a debt purchasers perspective Zuffa and the UFC have always been looked at by S&P as basically a "significant Risk' when it comes to buying their debt, with a BB rating (see Table 1), and when it comes to the perceived risk of their use of debt they are considered 'aggressive' which is the second riskiest bucket to be ranked in. (table 2)
 
So what does this mean as a debt buyer and those who have looked at every bit of revenue and expense and risk that ZUFFA faces. It means that investment in their bonds should only be undertaken by those who have significant risk tolerance to losing their investment while seeking a higher gain if things continue to work out.
 
This topic is so over discussed and misunderstood that I am going to try what may be impossible and shed some light on the topic based on what I consider the best known facts and analysis out there that we can get our hands on.
 
While Zuffa and UFC are not public companies and therefore do not disclose their information they do utilize Debt' to fund their ongoing operations and always have and they submit to getting their debt 'rated' which gives auditors a complete and 100% view of their financial health.
 
I myself and my company also utilizes debt for growth but we do not submit to a rating agency and thus those buying our debt do so more based on company representations then a 3rd party audit and rating and that generally means a higher cost for us, for the debt, as there is more uncertainty and thus more perceived risk. Zuffa and other large debt issuers submit to debt rating agencies because with that rating you will pay less for your debt thus lowering your costs.
 
 
I have read every Zuffa debt report issued over the years and commented on them prior. These are debt reports done by Standard and Poor's in the past to the ones issued by Moody's more recently. mmapayout.com tracks and reports on all prior Ratings if you want to view them (mid way down the page are the links)
 
MMAPayouts analysis of Zuffa debt is "Typically, a rating of “BB” implies that Zuffa is less vulnerable in the near term, although it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which can result in failure to meet its financial commitments."
 
And lets be clear...
 
So from a pure Debt analysis stand point there is nothing that suggests that Zuffa and the UFC have turned a corner yet where their business is secure or not of significant risk to investors buying their debt.
 
Something many sherdog posters seem to argue as exactly the opposite as if ZUFFA and UFC have turned the corner and are rolling in dough and equivalent to many other mature businesses and sports and thus should be able to pay athletes equivalently with revenue and profit shares.
 
Nothing could be clearer showing this is not the case...yet. The UFC still utilizes a lot of leverage (debt) to fund its ongoing operations and growth and the risks to them are still high in the costs of investing in New Markets. They must continue to transition their revenue split away from an over reliance on PPV and more to a balance between PPV, TV and other revenues.
 
The last Moody's debt analysis was done on Feb 2013. I recommend that anyone who wants to have an opinion on this topic read it here. And more so read the prior ones linked above in the mmapayout site.
 
While this is not the entire picture it is as complete as it can get without Zuffa being a public company.
 
2/21/14 10:47 PM
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Mihow
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Haven't we been through this once a month? Phone Post 3.0
2/21/14 10:50 PM
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Se7enout
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Mihow - Haven't we been through this once a month? Phone Post 3.0

Sorry was this posted? Didn't mean to annoy you. Just posting some info I found interesting as most opinions are based off of a guess around here. 

2/21/14 10:53 PM
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Mihow
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Se7enout -
Mihow - Haven't we been through this once a month? Phone Post 3.0

Sorry was this posted? Didn't mean to annoy you. Just posting some info I found interesting as most opinions are based off of a guess around here. 

Im having bad dejavu tonight just ignore me Phone Post 3.0
2/21/14 10:55 PM
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victorpoprock
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I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0
2/21/14 10:59 PM
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Jumbo Reverse Shrimp
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LOL. Now the poor UFC is going under financially? How convenient. Maybe Dana should lend them some of his garbage bag money.
2/21/14 11:00 PM
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UGPTT__IeatCOCKSforBreakfastAwYeah
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Sherdoggers? I think you're shilling the wrong site.
2/21/14 11:00 PM
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THP
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That didn't scare the Sheikhs from giving the UFC that sweet chedda bacon
2/21/14 11:01 PM
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Se7enout
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victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.

2/21/14 11:08 PM
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victorpoprock
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Se7enout -
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.

What's a normal debt to worth ratio?

I've heard estimates that the ufc is worth minimum 2 billion dollars. Like I said, I'm not very knowledgeable in business finance, but is 500 million an unusual amount of debt for a company worth 2 billion? Phone Post 3.0
2/21/14 11:09 PM
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Jumbo Reverse Shrimp
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Se7enout - 
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.


Who cares? they charge $60 for PPV and the advertise corn nuts ad nauseum. They ought to have money to pay their fighters. Where is the money going, to pay all those Mexican prospects to train UFC? GTFO.
2/21/14 11:12 PM
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FreightTrain
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I could care less about the UFC's finances.
2/22/14 12:23 AM
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If it ain't Dutch, it ain't much
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Jumbo Reverse Shrimp - 
Se7enout - 
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.


Who cares? they charge $60 for PPV and the advertise corn nuts ad nauseum. They ought to have money to pay their fighters. Where is the money going, to pay all those Mexican prospects to train UFC? GTFO.

Lobbying, Global expansion, 400+ person workforce, benefits for them, etc... Not a cheap company to run
2/22/14 12:31 AM
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Tolstolobic
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Garbage bags Phone Post 3.0
2/22/14 12:33 AM
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ChaosOverkill
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Jumbo Reverse Shrimp - LOL. Now the poor UFC is going under financially? How convenient. Maybe Dana should lend them some of his garbage bag money.

.

2/22/14 12:36 AM
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Jumbo Reverse Shrimp
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If it ain't Dutch, it ain't much - 
Jumbo Reverse Shrimp - 
Se7enout - 
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.


Who cares? they charge $60 for PPV and the advertise corn nuts ad nauseum. They ought to have money to pay their fighters. Where is the money going, to pay all those Mexican prospects to train UFC? GTFO.

Lobbying, Global expansion, 400+ person workforce, benefits for them, etc... Not a cheap company to run

Floyd "Money" Mayweather. Where does the money come from? The guys he and Pacquiao used to dodge each other make more than all the fighters from most UFC cards.

I guess boxing cameramen and commentators are volunteers.

LMAO at global expansion. That has shit to do with the current fighters.
2/22/14 12:48 AM
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Se7enout
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victorpoprock - 
Se7enout -
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.

What's a normal debt to worth ratio?

I've heard estimates that the ufc is worth minimum 2 billion dollars. Like I said, I'm not very knowledgeable in business finance, but is 500 million an unusual amount of debt for a company worth 2 billion? Phone Post 3.0

For a company expanding globally and at such a fast pace... I honestly thought it would be more BUT it's still a lot of debt. Everyone just assumes the ufc is stock piling money in garbage bags and laughing at the poor fighters but that's not the case.

the ufc employs more fighters then any other combat sports promotion in the world. They employ fighters from all over the globe and have head quarters all over the globe. 

They have a shit ton of overhead! That's not to say they aren't making any money but it's not nearly what most think. They only see $25 per ppv and that's befor fighter ppv points, taxes and cost of holding and producing the event.

with the global expansion and big tv deals the ufc has become more and more legit. Things like uniforms will only help further the sport in a good direction. 

2/22/14 1:44 AM
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MMALOGIC
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^ not to mention 400 plus actual employees.  fighters are independent contractors... lost in the conversation are the 400 plus actual employees at zuffa.  People are whining about revenue share for independent contractors when there are 400 plus people working from morning till night to make this happen...

 

2/22/14 1:47 AM
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ima zombie
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FRAT Phone Post 3.0
2/22/14 1:52 AM
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If it ain't Dutch, it ain't much - 
Jumbo Reverse Shrimp - 
Se7enout - 
victorpoprock - I'm not a financial genius by any means, but don't most corporations get loans and investments to fund their expansions?

Wouldn't it make financial sense to seek out investors to fund expansion so you don't assume 100% of the risk. Even companies that could easily afford funding new ventures often seek out investors to lessen their risk should the new venture fail. Phone Post 3.0

Yes a lot of businesses accumulate good debt but the point of the post is that the ufc has not yet turned the corner. They may finally be a profitable business but they are still a HUGE risk to people who purchase debt. 

500m in debt is huge for any company not name Disney. This doesn't mean that zuffa is going to lose the ufc any time soon but does show how much they are putting into the Asian, Latino and European markets.


Who cares? they charge $60 for PPV and the advertise corn nuts ad nauseum. They ought to have money to pay their fighters. Where is the money going, to pay all those Mexican prospects to train UFC? GTFO.

Lobbying, Global expansion, 400+ person workforce, benefits for them, etc... Not a cheap company to run

dont you guys from zuffa sleep,i know dana's a slave driver but get his c..k out of your mounth and take a day off.


no matter how much debt they r in,you dont go around spending 35 mill for an org you called second rate unless you r rolling in the dough

2/22/14 1:53 AM
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RyannVonDoom
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MMALOGIC -

^ not to mention 400 plus actual employees.  fighters are independent contractors... lost in the conversation are the 400 plus actual employees at zuffa.  People are whining about revenue share for independent contractors when there are 400 plus people working from morning till night to make this happen...

 

Most who dont even like mma. Fuck em Phone Post 3.0
2/22/14 3:07 AM
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the CREamcatcher
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RyannVonDoom - 
MMALOGIC -

^ not to mention 400 plus actual employees.  fighters are independent contractors... lost in the conversation are the 400 plus actual employees at zuffa.  People are whining about revenue share for independent contractors when there are 400 plus people working from morning till night to make this happen...

 

Most who dont even like mma. Fuck em Phone Post 3.0

This.

It's known that the UFC won't hire you if they find out you are a big time fan.
2/22/14 3:11 AM
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CindyO
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MMALOGIC -

^ not to mention 400 plus actual employees.  fighters are independent contractors... lost in the conversation are the 400 plus actual employees at zuffa.  People are whining about revenue share for independent contractors when there are 400 plus people working from morning till night to make this happen...

 

Lorenzo said when they run a show 1,000 people get paid. Its a much larger undertaking than casual fans might realize.

Cindy Phone Post 3.0
2/22/14 3:13 AM
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Thacommish
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MMALOGIC - 

^ not to mention 400 plus actual employees.  fighters are independent contractors... lost in the conversation are the 400 plus actual employees at zuffa.  People are whining about revenue share for independent contractors when there are 400 plus people working from morning till night to make this happen...

 


Because you cant make the argument they should be directly compensated for advertisements, endorsements, sponsorships, etc. like you can with athletes. Its simple, when those athletes forfeit up their likeness, and becomes vessels for sponsors that the company benefits from and are directly tied into the product the way fighters are, then it would be a great example. joe schmoe in accounting has nothing to do with fucking corn nuts. He is not entitled to corn nuts money. Corn nuts is not presenting its logo during HIS tv time.
2/22/14 3:15 AM
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Thacommish
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Plus thats a terrible argument your making, the vagueness of it is off the charts, are you trying to imply that THOSE particular employees should be paid more also? or that because their are other employees nobody should be paid more? you provide little information with that statement and just a bunch of finger pointing.

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