Moody's rates Zuffa loan Ba3

Moody's Investors Service said it assigned a Ba3 (LGD4, 50%) rating to Zuffa, LLC's (d/b/a Ultimate Fighting Championship) proposed $100 million senior secured incremental term loan and affirmed the company's corporate family and probability-of-default ratings at Ba3 and its senior secured credit facility at Ba3 (LGD4, 50%).

The outlook is stable.

Zuffa plans to use the proceeds to pay a dividend to its owners, repay revolving bank debt and for general corporate purposes.

The agency said the roughly $75 million net increase in debt utilizes some of the financial headroom that the company has built up through its strong revenue and cash flow growth driven by the growing popularity of mixed martial arts and the UFC. The incremental debt also increases the expected debt-to-EBITDA leverage ratio to 3.4 times from 2.8 times.

Zuffa's ratings reflect its premium mixed martial arts platform and brands, sturdy credit metrics, strong free cash flow and strong growth prospects, Moody's said.

However, the ratings are constrained by Zuffa's small size, high reliance on a limited number of pay-per-view events and the majority owners' history of being high financial-risk tolerant entrepreneurs, the agency said.

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