Lionsgate Credit Rating Upgraded on Reduced Debt
TORONTO – Standard & Poor’s has upgraded Lionsgate’s corporate credit rating.
The ratings agency raised Vancouver-based Lionsgate from B to B+ based on declining leverage and expectations that the debt burden will fall still further by the end of the fiscal year ending March 31, 2014.
“The upgrade reflects the significant improvement in Lionsgate's credit metrics since it closed on the acquisition of Summit Entertainment in 2012," S&P said in a statement Friday.
The rating agency in January 2012 first pointed to “positive implications” from Lionsgate taking on minimal debt to complete the $412.5 million takeover of Summit Entertainment, as it used around $284 million in cash from the balance sheet of the target company to complete the deal.
“We expect that the company will at least maintain current credit measures, and will likely modestly improve them over the next two years,” the ratings agency added as profits from The Hunger Games franchise and expanding TV production revenues feed into the bottom line.
S&P said Lionsgate continues to be exposed to the volatility of the theatrical movie business. At the same time, more “stable revenue and cash flow” from TV production and “longer-term upside” from digital distribution would temper the feature film risks, the credit agency argued.