Starz Entertainment Corp.’s ratings downgraded by Moody’s Ratings

Investing.com -- Moody’s Ratings has downgraded the ratings of Starz Entertainment Corp. (formerly Lions Gate Entertainment Corp (NYSE:LGFa).), including the Corporate Family Rating (CFR) to B3 from B2 and the Probability of Default Rating (PDR) to B3-PD from B2-PD. Additionally, the rating on the senior unsecured notes issued by its wholly owned subsidiary, Starz Capital Holdings LLC, was also downgraded to Caa1 from B3. The outlook for Starz’s ratings was changed to stable from being under review. The decision to downgrade these ratings concludes a review process that began on March 14, 2023.

The downgrade comes after Lions Gate Entertainment Corp.’s decision to split its businesses into two separate publicly-traded companies. The downgrade of Starz’s ratings is attributed to the company’s smaller scale, exposure to pressures facing pay-TV cable networks, and competition from larger streaming platforms.

The B3 CFR rating for Starz reflects the company’s small scale, elevated leverage, short history as an independent company, uncertainties surrounding its earnings growth and cash flow generation potential, and the competitive dynamics in the market it operates in. Starz continues to have a significant revenue exposure to linear revenue through its relationships with cable operators, who are facing a declining subscriber base.

Nevertheless, the rating takes into account the management’s commitment to reducing financial leverage to 2.5x over the next few years and maintaining adequate liquidity. Despite a challenging operating environment, Starz has managed to grow its digital revenue from 5% in FY 2017 to 65% in FY 2024 by offering over-the-top (OTT) and direct-to-consumer (DTC) services.

For 2025, Moody’s expects little top line growth for Starz as the company continues transitioning its subscriber base from linear to digital. The stable outlook reflects expectations that Starz will maintain good liquidity and a stable revenue and subscriber base. Moody’s anticipates that Starz will maintain adequate liquidity over the next 12-18 months, supported by about $18 million in cash as of March 31, 2025, and a $150 million undrawn revolving credit facility.

Following these rating actions, Starz’s ratings will be withdrawn at the issuer’s request, as per Moody’s Ratings’ Withdrawal of Credit Ratings Policy.

Starz is a provider of premium subscription video programming to consumers in the US and Canada, offering thousands of titles to its subscribers.

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