On the Closing Date of November 21, 2024, TKO Group Holdings, Inc. announced through an 8-K filing with the SEC that its indirect subsidiary, UFC Holdings, LLC, entered into a significant refinancing agreement.
The Fifth Refinancing Amendment to the First Lien Credit Agreement, originally dated August 18, 2016, introduces a new class of first lien secured term loans totaling $2.75 billion, referred to as "New Term Loans," and a revised secured revolving credit facility.
The New Term Loans, which mature on November 21, 2031, will carry a variable interest rate based on Term SOFR or the ABR, plus an applicable margin. This includes SOFR term loans at Term SOFR plus 2.25%, and ABR term loans at the highest of several rates plus 1.25%. The New Term Loans also stipulate a 1% principal amortization, payable quarterly.
The New Revolving Credit Facility, which matures on November 21, 2029, replaces the existing facility of $205 million. Interest rates for this facility will vary similarly to the term loans, with SOFR revolving loans at Term SOFR plus 2.00%-2.25% and ABR revolving loans at several rates plus 1.00%-1.25%, both contingent on the First Lien Leverage Ratio.
Following the amendment, UFC Holdings borrowed the full amount of the New Term Loans to repay the existing term loans and cover related fees and expenses. The financial covenant related to the New Revolving Credit Facility now requires a testing condition of the greater of $85 million or 40% of the borrowing capacity.
The filing also notes that certain parties involved in the Credit Agreement and their affiliates have had and may continue to have other commercial dealings with TKO Group Holdings or its affiliates, from which they receive customary fees.
This financial restructuring is detailed in the attached Exhibit 10.1 of the 8-K report, which provides full terms of the Credit Agreement Amendment. The reported financial activities are based on a press release statement.
In other recent news, TKO Group Holdings has made significant strides in its financial and strategic initiatives. The company has recently acquired Professional Bull Riders (PBR), On Location, and IMG from Endeavor in an all-equity deal valued at $3.25 billion. This acquisition is expected to enhance TKO's portfolio and contribute to its revenue streams. Concurrently, TKO's board approved a $2 billion share repurchase initiative and introduced a quarterly cash dividend of $75 million.
Despite this, Benchmark downgraded TKO shares from Buy to Hold due to potential concerns about the acquisition diluting growth and adjusted EBITDA margin. On the other hand, several firms including Citi, Guggenheim, and Goldman Sachs (NYSE:GS) have maintained their Buy ratings on TKO Group, expressing confidence in the company's sustained progress and potential for financial growth.
In legal developments, TKO Group agreed to a $375 million settlement in a consolidated class-action antitrust lawsuit, marking a significant development in the ongoing legal saga surrounding TKO's business practices. These are the recent developments in TKO Group's journey.
InvestingPro Insights
TKO Group Holdings' recent refinancing agreement aligns with its strong financial position and growth trajectory. According to InvestingPro data, the company's revenue growth is impressive, with a 108.3% increase over the last twelve months as of Q3 2024. This robust growth may have contributed to the company's ability to secure favorable refinancing terms.
InvestingPro Tips highlight that TKO operates with a moderate level of debt, which is reflected in the new credit agreement's structure. The company's liquid assets exceeding short-term obligations suggest a solid financial foundation to support this refinancing move.
The refinancing comes at a time when TKO is trading near its 52-week high, with a significant 69.57% price return over the past year. This market performance may have strengthened TKO's position in negotiations for the new credit terms.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for TKO, providing deeper insights into the company's financial health and market position.
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