Lionsgate to Sell $1 Billion in Notes to Pay Down Debt

Lionsgate to Sell $1 Billion in Notes to Pay Down Debt
Santa Monica-based Lions Gate owns Summit and Starz.

Lions Gate Entertainment Corp. is planning to raise $1 billion by offering senior notes in a private placement, the company reported on March 23.

The transaction is an effort to help Lionsgate pay down its outstanding debt. Lions Gate Capital Holdings, a subsidiary of the Santa Monica-based entertainment company, will use the funds as well as its cash on hand to redeem 6.375% and 5.875% senior notes due in 2024, as well as pay for expenses related to the offering.
In Lionsgate’s latest financial filing from Feb. 4, the company reported having roughly $2.56 billion in debt and $551.5 million in cash assets. Debt decreased around 5.5% year over year, and cash increased, up from $195.5 million in the third quarter of 2020.

“With the strong year we’re having in (fiscal 2021), we’re in great shape to take advantage of the imbalance between content supply and demand in the current environment with an increased investment in content and marketing across our core businesses in F22,” Lionsgate Chief Executive Jon Feltheimer said in the earnings report.

The company also beat Wall Street expectations in the third quarter with $836.4 million in revenue. That was down 16% year over year, but analysts had predicted $776.5 million in quarterly revenue.

Its net loss attributable to shareholders was 21 cents a share, or $13.9 million, down from a loss of $91.2 million in the third quarter the previous year.

Following the March 23 announcement, the company’s share price briefly spiked, peaking at $18.25, then fell throughout the day to close at $16.88. A day earlier, it closed at $17.99.

The announcement comes as Lionsgate shifts its focus to its direct-to-consumer business. Its Starz streaming service gained 900,000 subscribers globally in the third quarter for a total of 14.6 million streaming subscribers. Across all streaming and television offerings, it now has 28 million subscribers.

Starz, which was acquired by Lionsgate in 2016, has expanded its global streaming reach through several avenues in the past few months. Since June 2020, Starz has expanded its Starzplay service into Italy, Switzerland, France, Indonesia and the Nordic region; launched its app in six new markets; and brought Starz to Amazon Fire TV in France, Brazil, Italy, Spain, Germany and the United Kingdom.

The streaming service operates in more than 55 territories, and around 600,000 of the company’s new subscribers in the recent quarter were not based in the United States.
In March, the company announced it would give Starz priority access to theatrically released Lionsgate and Summit Entertainment films.

The agreement gives Starz an exclusive first window on Lionsgate films starting at the end of 2021, when the company’s agreement with Santa Monica-based streaming service Hulu expires. Summit label films will be available in the window on Starz when the company’s deal with Home Box Office Inc. expires at the end of 2022.

Despite growth in streaming, Lionsgate was hit hard by the pandemic. In November, it laid off 15% of its motion picture group. The company had also laid off members of its marketing and distribution segments in March 2020 as movie theaters shut down. In the third quarter of its fiscal 2021, motion picture revenue for the company plummeted 48% to $250.3 million, compared to $473.9 million in the third quarter of its fiscal 2020.

In December, Lionsgate restructured its motion picture group into four segments: marketing, distribution, strategy and innovation, and content. The group’s restructuring had been planned since May 2020.

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