New arrangement comes on heels of Summit acquisition
EXCLUSIVE: Lionsgate has closed an $800 million refinancing, marking the largest of such transactions in Hollywood in recent years that will save the company millions of dollars annually.
As Variety first reported, the company had originally targeted up to $750 million for the five-year deal back in July. But every major lender wanted to participate, enticed by the success of the “Hunger Games” franchise and the recent Summit acquisition. Size and scope of the transaction shows just how much confidence Lionsgate has from the bank market.
JPMorgan co-led the deal with Bank of America and other major financial institutions.
Village Roadshow, Legendary and MGM have refinanced their credit facilities in recent months, but none have been as big as Lionsgate’s deal.
Refinancings are yet another sign of banks returning to the entertainment space. Their confidence is backed largely in the faith in the long-term value of content. That’s good news for both film libraries and upstart companies looking to generate original content on emerging platforms.
Lionsgate’s coin will allow the company to add millions to its bottom-line. The refinancing gives the company debt at a much cheaper price than what it previously had.
Deal also came as no surprise to financial observers, who note that such a transaction is typical after a major acquisition. Many studios are also looking to take advantage of competitive interest rates in advance of their debt facilities expiring. Lionsgate’s structure replaces its previous $340 million facility.
Lionsgate’s facility typically pays for general corporate operations and acquisitions, not film production, which the company usually funds on a single-picture basis. Company’s acquisitions have included the recent purchase of Summit as well as the TV Guide Network, Mandate Pictures and Artisan Entertainment.
New deal would take advantage of projections for Lionsgate’s “Hunger Games” franchise, which has an installment unspooling in 2013. That, plus Lionsgate’s lucrative TV series “Mad Men” and “Nurse Jackie,” are expected to generate $900 million in EBITDA over the next three years, according to a May earnings call with CEO Jon Feltheimer. That number includes Lionsgate’s film library of more than 13,000 titles and 23 TV shows on 16 different networks, including Showtime’s “Weeds” and FX’s “Anger Management.” The film library generates approximately $150 million in cash flow annually.