The rating service followed through today on the path it hinted it would take in March when it put Lionsgate‘s debt under review. It only delivered a small bump: Lionsgate’s corporate family went to B1 from B2 — which means it’s still considered speculative. That’s due in part to “the inherent high risk and typical low margins associated with the film production business and the mixed performance of Lionsgate’s film slate in recent years,” Moody’s Investors Service says. Still, its analysts say that the success of The Hunger Games “has significantly improved the company’s cash flow generation and de-leveraging prospects.” In addition, the acquisition of Summit Entertainment “has been credit positive for the company from both a strategic and financial standpoint.” It will “help diversify Lionsgate’s revenue stream by adding the successful Twilight franchise to its current portfolio, and result in significant cost savings from overhead reduction and marketing and distribution synergies.” Moody’s notes that Lionsgate’s 31.2% stake in EPIX can contribute now that it “generates free cash flow and does not require additional investments from the company as it did a few years back.” Debt holders also would benefit if Lionsgate unloaded its 51% interest in the TVGuide Network, “which it has shown strong interest in selling over the past year.”
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