Endeavor, the US-based sports and entertainment group whose assets include the IMG agency and Ultimate Fighting Championship (UFC), has finalised a $260m (€240.3m) term loan to help the company tackle the ongoing effect of the Covid-19 pandemic.
Having spent heavily to amass various entities across entertainment and sports to add to its traditional talent agency business, Endeavor is viewed as particularly vulnerable to the crisis, which has led to the shut down of concerts, festivals, film production and sports events alike.
To coincide with its wide-ranging cost-cutting initiatives, Endeavor has secured the loan that supplements an existing $2.8bn term loan and will carry an interest rate of just under 11 per cent, according to The Wall Street Journal.
JPMorgan Chase & Co., the US-based investment bank, is acting as the lead arranger on the new loan and credit investor Oaktree Capital Group has agreed to purchase the largest piece, it is claimed.
Endeavor’s credit rating has been downgraded in recent weeks by Moody’s Investors Services and S&P Global Credit Ratings due to the hit on revenues and estimated $4.5bn in debt.
Endeavor warned at the end of last month that around a third of its 7,500 staff would be furloughed, laid off or given reduced working hours. Endeavor-owned talent agency WME said last week that it would cut its workforce by around 20 per cent.
The first cost-cutting measures came in March as Endeavor laid off around 250 staff as the sports and film industries continued to be hit by the Covid-19 pandemic. The first round of cost cutting mainly affected operational staff unable to work from home and chiefly those at IMG Academy, the agency’s sports and educational performance unit.
Endeavor pulled its initial public offering planned for September 27 last year after facing continued headwinds regarding the offering and its company financials. It had initially been expected that Endeavor would list on the New York Stock Exchange by August.
Endeavor president Mark Shapiro has now described “rumours” about the dire financial health of the company as “fiction”.
He told The Los Angeles Times: “I’m not going to speculate who is throwing the darts, but it’s a combination of our numbers being so readily available, given the IPO [prospectus] and the fact that we are global in nature, operating businesses in multiple regions, and the fact that we’re in a very sexy business.
“Put that all together, and add that we’re not hiding from the fact that we are making cost cuts, that makes for a lot of chatter. On top of that, you might have competitors taking shots.”
However, Los Angeles investment banker Lloyd Grief told the newspaper: “Change is on the horizon and it has to be massive. I’m not talking about tweaking this or that. They need a total overhaul.”
On the measures already adopted, Shapiro said: “We’ve made very responsible and prudent decisions in regards to remodeling our cost structure in the face of the pandemic.”
Endeavor’s UFC and Professional Bull Riders have been two of the few sports properties to continue operating some events during the global shutdown.
On the resumption of future events across the Endeavor portfolio, Shapiro said: “There’s a great demand for events and content.
“We are well positioned to be the first out of the gate for that. We just have to get to the other side.”
Endeavor, which counts US-based private equity firm Silver Lake and Japanese telecoms and internet firm SoftBank among its investors, is “fortunate to have access to capital to keep us more than solvent through a prolonged period”, according to Shapiro, before adding, “that doesn’t mean forever”.
Endeavor is also in the process of securing more funds through the sale of part of its stake in US video game and software developer Epic Games, producer of the hugely popular Fortnite title. The sale could raise as much as $100m.
In August 2019, Endeavor reported first-half revenues of $2.05bn and adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of $249.7m, as the effect of a trio of hefty football media-rights contracts was felt.