Lionsgate in Investor Talks for Rare Film Library-Backed Bonds

(Bloomberg) -- Lionsgate Studios Corp., the filmmaker behind The Hunger Games and other titles, is looking to sell bonds backed by its catalog and talking to investors about a possible transaction.

Japanese lender Mitsubishi UFJ Financial Group Inc. is arranging early discussions between the film-production company and money managers that may or may not lead to an offering, according to people with knowledge of the matter, asking not to be named as the information is private.

The film studio is in the middle of a turbulent period. Its shares have fallen more than 25% from their peak in June, and activist investor Anson Funds Management is pressing the company to sell itself. Legendary Entertainment has submitted a takeover offer, Bloomberg reported last week, and Anson portfolio manager Sagar Gupta said on Bloomberg TV that Lionsgate could also attract bids from companies including Netflix Inc.

It's not clear how a securitization would fit into Lionsgate's plans. Possible terms of any bonds the company might sell aren't known. A Lionsgate spokesperson declined to comment. MUFG didn't respond to requests for comment.

Companies rarely sell bonds backed by movies and TV shows. The last notable such sale was in 2020, when Village Roadshow Entertainment Group Ltd., owner of movies including the Matrix trilogy, sold $421.5 million of securities.

Lionsgate has more than 20,000 TV shows and movies in its library, including titles such John Wick, according to its website. In May of last year, Lionsgate completed a separation from streaming service and television network Starz Entertainment Corp., which it had acquired in 2016.

Lionsgate had over $1.9 billion of corporate debt as of June 30, according to its latest regulatory filing. That included an intellectual property-linked loan of more than $1 billion due in September 2030, paying 225 basis points over the comparable Secured Overnight Financing Rate, or SOFR. Additionally, every quarter it pays off 2.5% of the total outstanding principal at that time, the filing shows.

The studio's library generates about $1 billion in annual revenue, Bloomberg Intelligence analyst Geetha Ranganathan wrote in an Oct. 22 note, adding that Legendary's bid may be the start of the process rather than the end. "I think it could make sense given the deep catalog," she said in an email, when asked about Lionsgate's potential debt offering. "Library-backed bonds could lower funding costs, but the flip side is lower flexibility to use those assets or the catalog in the potential M&A transaction."