S&P rates UFC CCR B, facility B+

S&P said it assigned its B corporate credit rating to UFC Holdings LLC.

The outlook is negative.

At the same time, the agency assigned its B+ issue-level rating and 2 recovery rating to the company's $1.45 billion credit facility (consisting of a $150 million revolver due 2021 and a $1.3 billion term loan B due 2023). The 2 recovery rating reflects an expectation for substantial recovery (70% to 90%; upper half of the range) for lenders in the event of a payment default.

Proceeds from the first-lien term loan, along with $500 million in planned second-priority debt at a future date, $400 million in planned preferred equity to be issued at a UFC intermediate parent company (which S&P views as a debt-like obligation), and about $1.75 billion in equity contributions will be used to fund the $4 billion acquisition of the company (including refinancing outstanding debt at Zuffa LLC) and its UFC-branded and related business operations by a consortium of investors led by U.S. sports, media, and entertainment company WME IMG.

S&P expects to assign a CCC+ issue-level rating and 6 recovery rating to the planned second-priority debt as soon as practical upon the launch of this debt. The expected 6 recovery rating will reflect an expectation for negligible (0% to 10%) recovery for lenders in a simulated payment default.

Ratings on operating company Zuffa LLC remain on CreditWatch with negative implications, but the agency expects to lower the corporate credit rating on this entity to B, in line with the rating on UFC Holdings LLC, and subsequently withdraw all ratings on Zuffa LLC upon the close of the transactions.

"The B corporate credit rating reflects very high anticipated adjusted leverage to complete the acquisition, partly offset by good EBITDA coverage of cash interest expense and an adequate liquidity profile," S&P credit analyst Emile Courtney said in a news release.

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