There appears to be no end in sight for Endeavor’s financial woes.
Just days after the Hollywood conglomerate announced lay offs, furloughs, and pay cuts for approximately 2500 employees — roughly one third of the company — it has now been hit with a credit rating drop from financial services company Moody’s.
Moody’s, which joined S&P Global Ratings in downgrading Endeavor sizeable debt from stable to negative, claimed that the company “has maintained very high leverage levels and issued additional debt to help fund acquisitions historically.”
“WME IMG is expected to have adequate liquidity due to cash on the balance sheet ($145 million pro forma for the On Location Experiences acquisition in January 2020) and a $200 million revolver that matures in 2023, but the liquidity position is projected to deteriorate until the impact of the coronavirus subsides,” read the Moody’s report (h/t Hollywood Reporter).
Endeavor — a company that includes subsidiaries such talent agency WME IMG, On Location Experiences, Miss Universe Pageant, Professional Bull Riders, and the Ultimate Fighting Championship (UFC) — is saddled with a 4.6 billion debt burden owed to Silver Lake Partners and other private equity investors over the purchase of the UFC in 2016.
The UFC reaped a reported $900 million in revenue in 2019 (only 16% of which was paid out to fighters). However, given that the promotion is yet to resume its live events schedule, Endeavor has lost yet another important source of revenue at a crucial time.
Moody’s also noted that Endeavor operates with an “aggressive financial policy” that resulted in unsustainable capital structure. As the coronavirus pandemic continues to spread across the United States — over 1 million confirmed cases and nearly 60,000 deaths — it remains unclear when Endeavor will be able to resume its regular events schedule.