S&P Revises Lionsgate Outlook to Positive

The rating agency cited the mini-studio's film and TV slate, including "The Hunger Games" and the upcoming "The Twilight Saga: Breaking Dawn Part 2," to justify the upgrade.

TORONTO – Standard & Poor's Ratings Services has upgraded its outlook on Lionsgate to positive, from stable, and affirmed its B rating.

The revision, according to the rating agency, follows “recent successes of the company's film slate,” including The Hunger Games and the upcoming The Twilight Saga: Breaking Dawn Part 2.

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S&P said Lionsgate’s current rating reflects its “highly leveraged” financial risk profile, according to its measure.

At the same time, the mini-studio is riding a favorable tailwind to greater likely profitability.

“We believe the continued success of The Hunger Games franchise (three more films are expected over the next three years) could improve Lionsgate's profitability and credit profile, especially if accompanied by continued TV success and the success of other feature films that builds the company's base of continuing cash flow,” S&P said in its report.

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The rating agency cautioned quarterly financial performance by nature fluctuates widely.

But S&P could raise its rating on Lionsgate to B+ “if the soon-to-be-released Twilight film were to perform at least in line with the previous Twilight films, giving us greater confidence in our $200 million EBITDA estimate for fiscal year 2013.”