Icahn studio takeover risky, warns S&P

Says decision may be detrimental to Lionsgate's credit rating

TORONTO -- A successful takeover of Lionsgate by activist shareholder Carl Icahn will put the indie studio's credit rating at risk, Standard & Poor's Ratings Services warned Thursday.

"We could lower the rating if the company takes actions that cause its credit measures to deteriorate from their already weak levels, or if the tender offer succeeds and it appears unlikely that the banks and bondholders will grant a waiver," S&P said in a statement after Icahn and Lionsgate executives this week escalated their war of words over Icahn's $6-per-share bid for all outstanding stock in the Vancouver-based studio.

Icahn taking control of Lionsgate could trigger a default of the studio's banking covenants if a waiver is not secured.

Lionsgate earlier this week dismissed Icahn's unsolicited $6-per-share offer for a second time, calling it too low.

Rival ratings agency Moody's Investors Service on March 16 said Icahn's original tender offer to take his stake from 18.9% to 29.9% also threatened Lionsgate's creditworthiness.

"A successful tender would put negative pressure on the company's credit rating as the company does not presently have material financial flexibility within its current credit rating," Moody's analyst Neil Begley said in a statement.
comments powered by Disqus