Lionsgate Credit Rating Upgraded by Standard & Poor's

The Hunger Games Mockingjay Part 1 Still 8 - H 2014
Courtesy of Lionsgate

The Hunger Games Mockingjay Part 1 Still 8 - H 2014

The ratings agency boosted the 'Hunger Games' studio to BB from B+ on better earnings visibility

Standard & Poor's has upgraded the corporate rating for Lionsgate.

In a report on Tuesday, the ratings agency raised the mini-studio to BB from B+ based on better earnings visibility. "The stable outlook reflects our expectations that Lionsgate will broaden its cash flow base by firmly establishing new film franchises, expanding its film library cash flow and growing its TV production segment profitably — all of which could reduce earnings volatility," wrote Standard & Poor's analysts Naveen Sarma and Chris Valentine in their investors note.

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That expected increase in revenue and cash flow counters other analysts forecasting a drag on earnings for the mini-studio after The Hunger Games franchise wraps in 2016. Standard & Poor's pointed to the "inherent volatility" of the movie business, on which Lionsgate depends to drive its business.

But the analysts added Lionsgate selecting "larger-budget film franchises and moderate cost films, while pre-selling certain rights to reduce the financial risk to the company, improves visibility into its future earnings." Standard & Poor's also welcomed Lionsgate diversifying into TV production and digital distribution to "temper feature film risks."

Shares in Lionsgate on Tuesday closed at $30.09 on the New York Stock Exchange, down 52 cents, or 1.7 percent.