Coronavirus is hitting the business of sports harder than any other industry. The top sports business companies have started showing the signs of the rising debt pressure with their fund flows coming to a virtual halt due to cancellations and postponements of sports events worldwide.
The UFC, WME and IMG parent company, the Endeavor Group is reportedly is reportedly under pressure to deal with its long-term $4.6 billion debt.
Endeavor, the parent company of UFC, WME and IMG, is poised for a big hit due to the menace of Coronavirus. Endeavor group companies business revolves around sports tournaments, fashion shows, food and wine festivals and other types of gatherings that have been cancelled or postponed due to global emergency situation because of the COVID-19 spread.
The sudden loss of revenue from cancellation and postponement of events could make it hard for Endeavor to service its short- and long-term debt commitments as well as those of UFC, which was acquired by Endeavor for $4 billion in 2016.
According to Bloomberg News, as of August, Endeavor had long-term debt of $4.6 billion. In January, Endeavor had acquired hospitality firm On Location Experiences for $660 million. Endeavor had hoped to issue a public offering last September that would have helped ease the company’s debt burden, but because of slow IPL market they had to pull the offering.
S&P Global predicts that Endeavor’s revenue from events could drop this year by “mid-teens” percentage and that its debt will reach a ratio of seven times its earnings before interest, taxes, depreciation and amortization. That’s a high level that prompted S&P to put the company on its CreditWatch. A downgrade in Endeavor credit rating would make it costlier to refinance its existing debt and harder for the company to pursue more acquisitions.
Given the fast-moving nature of the coronavirus crisis, S&P Global said it would take some time to determine whether Endeavor’s leverage ratio will climb higher “or if we lose confidence (Endeavor and UFC) can maintain adequate near-term liquidity.”
The UFC has postponed its next three fights already as the coronavirus outbreak continues to cripple the sports world. The next three events were set to take place March 21, 28 and April 11th.