By Zach Arnold | October 8, 2016
America’s Federal Reserve and Goldman Sachs have long had a revolving-door relationship. That relationship is now getting tested by Janet Yellen and the Obama Administration in regards to banks pitching high-leveraged business propositions.
Bloomberg News reported on Thursday that Federal Reserve supervisors have sent Goldman Sachs a warning letter regarding promises they supposedly made to prospective buyers for the UFC.
- Goldman Sachs allegedly marketed UFC as a business property that could generate nearly $300 million USD in yearly EBITDA. However, the current EBITDA for UFC is reportedly less than half – $142 million EBITDA.
- Reportedly in August, there were buyers interested in buying high-yield UFC debt. $1.8 billion dollars in UFC debt was purchased.
These figures have allegedly alarmed Federal regulators because of the net debt to EBITDA ratio. Using these figures, UFC would have a ratio of 12 — which would be alarming. Bloomberg reports that numerical adjustments lowered UFC’s ratio to 6.
This information comes at a time where word is spreading about new UFC ownership wanting to create multiple television deals with different cable & broadcast networks when the Fox Sports deal expires in 2019. Exclusivity of UFC’s product has kept Fox Sports 1 afloat as a fledgling cable sports channel. Without UFC programming, FS1 struggles to attract programs that draw 6-figure ratings. UFC is the network’s lifeline.
The financial pressure for UFC’s new venture capital owners to maximize profits is high. The financial pressure for Fox Sports to keep FS1 going is meaningful. Big changes could be coming for both parties in two years.