S&P rates eOne notes B+, revolver BB

Standard & Poor’s said it assigned a B+ long-term corporate credit rating to Entertainment One Ltd. (eOne).

The outlook is stable.

The agency also said it assigned a B+ rating to eOne’s proposed £285 million senior secured notes. The recovery rating is 3, indicating 50% to 70% expected default recovery.

S&P also said it assigned a BB rating to eOne’s £100 million proposed revolver with a recovery rating of 1, reflecting 90% to 100% expected default recovery.

The ratings reflect the company’s leading position as an independent film producer and distributor, constrained by the group’s significant exposure to the structurally declining DVD business and eOne’s somewhat low margins compared to peers, the agency said.

eOne uses most of its cash flows for the acquisition of content rights and investments in the production of content, S&P said.

This results in limited flexibility for reducing leverage over the next two years, the agency said.

S&P said it predicts that leverage will remain at 3x to 4x in 2016 through 2018.

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