S&P upgrades MGM, loan to BB

Standard & Poor's said it raised its corporate credit rating on Metro-Goldwyn-Mayer Inc. (MGM) to BB from B+ and revised the outlook to stable from positive.

At the same time, the agency raised the issue-level rating on the company's $300 million second-lien term loan to BB from B+. The recovery rating remains 3, indicating an expectation for meaningful (50% to 70%; higher half of the range) recovery in the event of a payment default.

"The ratings upgrade reflects MGM's improved operating cash flow, due to the continued monetization of its film library and the broadening of cash flows from its expanding TV production," S&P credit analyst Naveen Sarma said in a news release.

"This upgrade is supported by the company's performance in 2014, including $373 million of operating cash flow, of which a substantial amount consisted of earnings from the library, which we view as relatively stable, and by the company's September 2014 acquisition of United Artists Media Group (UAMG), which, in our view, diversifies MGM's cash flows.”

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