Endeavor's Credit Rating Downgraded by Moody's

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Endeavor CEO Ari Emanuel

The research firm noted that the conglomerate is "highly leveraged" and that "the anticipated significant drop in revenue in 2020 could potentially result in an unsustainable capital structure."

Five days after Endeavor confirmed layoffs, staff cuts and pay cuts that will impact roughly a third of its 7,500-person workforce, the firm has been hit with a credit ratings downgrade from Moody's.

The financial services company on Monday revised its credit facility ratings on Endeavor — the parent company of talent agency WME, modeling agency IMG, Ultimate Fighting Championship and Professional Bull Riders — from stable to negative. Moody's noted that the novel coronavirus pandemic "has limited the ability to hold live events and complete media production as anticipated."

"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 ratings action from Moody's. 

Endeavor, based in Beverly Hills and led by CEO Ari Emanuel, said on April 22 that it was in the process of implementing "cost-saving measures in phases across our companies and geographies and intend to complete most of this process in late May." 

The firm, which had filed its IPO plans on May 23 of last year with the goal of raising more than $600 million in a public offering, officially dropped its plans on Oct. 16.

Since then, Endeavor acquired speakers firm Harry Walker Agency (HWA), nabbed a significant minority stake in former ABC chief Lloyd Braun's media company Whalerock Industries and bought premium hospitality firm On Location Experiences in a deal valued at $660 million. All of those moves were made before the novel coronavirus effectively shuttered Hollywood's film and TV production in mid-March stateside. 

Moody's revised its status of Endeavor exactly two weeks after S&P Global Ratings similarly lowered its rating and outlook to negative, noting that the company has "a highly leveraged capital structure, therefore the anticipated significant drop in revenue in 2020 could potentially result in an unsustainable capital structure."

S&P Global, in its April 13 bulletin, added of Endeavor, "We believe the level of financial risk could motivate the company to seek a distressed debt restructuring if coronavirus containment does not occur by midyear so that revenue can begin to recover."

In issuing its guidance, Moody's noted Endeavor's "aggressive financial policy," adding that the company "has maintained very high leverage levels and issued additional debt to help fund acquisitions historically."