Lions Gate's New Credit Facility

Lions Gate Entertainment Corporation (LGF - Analyst Report) – producer and distributor of motion pictures for theatrical and straight-to-video release, and television programming for cable and broadcast networks – has recently announced a new five-year revolving credit agreement with a consortium of world’s leading investment bankers.

The new $800 million revolving credit line facility will help Lions Gate enhance its financial flexibility and demonstrate its healthy rapport with the financial communal. Moreover, management said that the new facility signifies the importance of its franchises and filmed entertainment library.

Lions Gate has also notified that the new facility has replaced the earlier $340 million credit facility and this reflects the growth of the company’s borrowing base. The extended revolving facility will assist the company to develop, implement its strategic plans, and to focus on long-term financial goals.

The company has not mentioned any particular purpose for utilizing the funds under the new credit facility.

Under a revolving credit facility, a company can borrow again once it repays all the dues under the old credit facility. The company may utilize this fund for general corporate purposes, including repayment of outstanding commercial papers, working capital and capital investment or acquisitions.

The company’s production and distribution capacity is largely benefited by Summit's film operations, which was acquired in January 2012. In addition, it will help Lions Gate to emerge as a leading international sales group by broadening its global reach.

The company has announced several releases, such as Summit's The Twilight Saga: Breaking Dawn – Part 2, scheduled to release on November 16, 2012, and the next installment of The Hunger Games franchise, The Hunger Games: Catching Fire, will be released on November 22, 2013.

To grab its share of box office receipts, Lions Gate competes with other major studios, such as Fox Entertainment Group, Paramount Motion Pictures Group and Time Warner Inc. (TWX - Analyst Report).

Lions Gate retains a Zacks #3 Rank that translates into a Hold rating over the next 1-3 months, reflecting the strategic endeavors undertaken by the company to put itself on the right path and correlates with our long-term ‘Neutral’ recommendation on the stock.