S&P: Zuffa outlook stable

Standard & Poor's said it revised its outlook on Zuffa LLC to stable from negative and affirmed its ratings, including the BB- corporate credit rating.

The outlook revision reflects improved performance in recent quarters, the agency said, citing the profitability of the company's international operations thus far in 2008 following periods of substantial losses in 2007 as the company ramped up its operations in the United Kingdom. In addition, Zuffa's cash flow base has improved to the point that the company's financial risk profile has sufficient cushion to absorb a moderate level of volatility at the current rating, in S&P's view.

The BB- rating reflects the risk of revenue and cash flow volatility given Zuffa's primarily event-driven business model, its vulnerability to changing consumer tastes or the impact of weak economic conditions on consumer discretionary spending and a relatively short operating history, the agency said.

These risks partly are offset by the company's well-recognized Ultimate Fighting Championship brand, healthy free cash flow conversion given strong EBITDA margins and modest capital intensity and moderate debt leverage, S&P added.

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