Dienstag, 1. Juli 2014

Number of the month: World Triathlon Corporation takes USD 220 million loan and pays out dividend to shareholders

World Triathlon Corporation (WTC) pays out a USD 220 million didvidend to its shareholdes Providence Equity Partners. The USS 220 million term loan is due for repayment in 2021 and a USD 20 million "revolver" (revolving credit facility) is due for repayment in 2019. Standard & Poor’s and Moody's analysts published their rating following the latest developments.

Fortune's analysis, based on Standard & Poor's rating is harsh, but sees some real company value anyway [1]:
The debt left World Triathlon highly leveraged and earned a “B” junk rating from Standard & Poor’s because of the company’s exposure if the economy sours. But the financing, which was oversubscribed, also reflects all the untapped potential Providence still sees in an investment it is likely to hang on to for a few more years. (An IPO is a less likely possibility given the small size of the company.)  
“It’s exciting. We’ve helped build Ironman into a global sports platform and there’s still lots of work to do,” said Davis Noell, a managing director at Providence Equity Partners and an Ironman board member. 
Ironman has one big advantage any corporation would dream of having while it ramps up: its ownership of the “Ironman” name, the result of years of defending its intellectual property. While anyone can put on a triathlon of the same distance, no one else can bestow on finishers the status of “Ironman,” a near mythical status for triathletes. 

Meanwhile Moody's Investors Service has assigned a B2 Corporate Family Rating (CFR) and B2-PD Probability of Default Rating (PDR) to WTC [2].
WTC's B2 CFR reflects its highly predictable and recurring revenue, strong brand loyalty and good free cash flow generation due to its minimal capital requirements. Moody's also expects WTC to benefit from the positive industry trend of higher participation rates in triathlon races as it expands by offering additional events around the world. These strengths are offset by the company's small scale, low margins, its narrow business focus, lack of tangible assets, reputation risks and high leverage from an aggressive financial policy reflected by the dividend recap.
WTC has experienced strong revenue growth over the past several years by introducing new IRONMAN races to additional locations around the world. IRONMAN races continue to experience strong demand , fueled by a higher rate of participation in triathlons globally. The IRONMAN brand is the most valuable aspect of the company and its strong following and high level of awareness, even amongst non-participants, allows WTC to successfully market and sell out many of its races well in advance of the event date. Additionally, due to the high level of brand awareness, Moody's believes that it would be extremely difficult to displace WTC from its current leading position the world of endurance triathlon.
Pro forma for the transaction Moody's expects the company to maintain moderate leverage going forward in the 4x to 5x Debt/EBITDA range(Moody's adjusted).. However given the company's low capital intensity, Moody's expects free cash flow will be over 10% of debt each year over the next several years.
In 2008, New York based private equity company Providence Equity Partners became the new owner of WTC and bought out forme owner Dr. James P. Gills. WTC was under the umbrella of the then created World Endurance Holdings. WTC made during the 6 years ownership some bold and strong acquisitions and is for sale for some time now. Latest aqcquired companies and races are:

  • Auckland Marathon, largest road running event in New Zealand. May 2014
  • Lifesport Properties, Subaru Western Triathlon Series. May 2014
  • Tritlon Spain SL, Challenge Barcelona and Half Challenge Barcelona. April 2014.
  • ChesapeakeMan, race acquisistion from The Columbia Triathlon Association. April 2014
  • YWC Sports, races in Denmark like Copenhagen and Aarhus. June 2013.
  • USM Events,  Australian triathlons in Cairns, Geelong, Mooloolaba, Noosa and Sydney World Triathlon Series. February 2012.
  • North American Sports, U.S. Ironman races. 2009.
  • Xdream Sports & Events, German Ironman races. 2009.
  • Triangle Sports Promotion, Austrian, South African Ironman races. 2009
  • BK Sportpromotion, Swiss Ironman races, 2009.
  • etc.