Standard & Poor’s issued a revised rating outlook for Ultimate Fighting Championship parent company Zuffa on Wednesday, and the forecast was not pretty.
According to the credit agency, Zuffa’s earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to decline 40 percent in 2014. Standard & Poor’s initial projection had Zuffa at a 30 percent decline.
The revised figure resulted “primarily due to a change to a marquee fight card in the fourth quarter of 2014 as a result of another fighter injury causing anticipated pay-per-view buys and event ticket prices to decline further, as well as higher remarketing expenses for the event, and additional costs related to the company's international expansion.”
A number of injuries have hampered the UFC’s plans in the second half of 2014. Some of the most significant: Jon Jones withdrew from a light heavyweight title defense against Daniel Cormier at UFC 178 due to a knee injury; UFC heavyweight king Cain Velasquez had to bow out of the promotion’s first trip to Mexico at UFC 180; and Chris Weidman pulled out of UFC 181 after injuring his hand. In addition, UFC 176 was canceled when a featherweight title clash between Jose Aldo and Chad Mendes was scratched from the event.
Standard & Poor’s expects Zuffa’s outlook to improve in 2015, provided that a few key changes occur.
“Our preliminary expectation is that negative trends in 2014 will reverse in 2015 as injured fighters return and PPV buys and ticket prices increase to levels comparable with fiscal 2013,” stated the report.
The UFC recently announced plans for an ambitious 2015 itinerary that includes 45 events and a number of international fight cards. Such a schedule could continue to adversely affect the organization’s credit ratings if its luck does not improve.
“Higher ratings would be dependent upon contractual broadcasting revenue increasing to a level that significantly mitigates the negative cash flow impact of event risk from potential future canceled and rescheduled events,” the report stated. “Although unlikely over the next few years, we could consider higher ratings if we believe Zuffa will sustain debt to EBITDA below [three times] on average.”