Sources: WME-IMG's Loan Structure For UFC Buy "Could Be Problematic" With The Fed

Federal Reserve examiners in recent weeks have notified WME-IMG's lenders, Goldman Sachs and Deutsche Bank, that the way the agency was able to stay under federal lending guidelines for its $4B UFC purchase "could be problematic," according to sources cited by Hoffman & Wirz of the WALL STREET JOURNAL. Sources added that the loans backing UFC's buyout "attracted so many bids from funding managers -- about triple what was needed" -- that WME-IMG was "able to borrow more cheaply than it had expected." A EBITDA figure for UFC of $300M was "presented to debt investors" when the outfit was being sold, and that figure allowed WME-IMG to borrow $1.8B for the deal "without exceeding a regulatory 'leverage' guideline." But sources said that UFC actually posted $170M in EBITDA for the fiscal year ending June 30. Hoffman & Wirz noted a federal guideline "discourages banks" from lending more than six times a company’s EBITDA. Regulators in recent years have shown "increasing concern about such moves" (WSJ.com, 10/16).