Lions Gate Entertainment(LGF_A) - 2025 Q4 - Annual Report

Debt Obligations and Liquidity - Starz's cash flow from operations is expected to be significantly dedicated to servicing its debt obligations, which may limit its ability to fund capital expenditures and growth initiatives [147]. - Starz may face substantial liquidity problems if its cash flows and capital resources are insufficient to fund its debt service obligations, potentially leading to asset disposals or restructuring [148]. - Starz's subsidiaries may not be able to generate sufficient cash flow to support the repayment of corporate indebtedness, as certain subsidiaries are not guarantors of this debt [149]. - A breach of covenants under Starz's corporate indebtedness agreements could result in an event of default, allowing creditors to accelerate repayment [154]. Interest Rate Risk - As of March 31, 2025, Starz's 5.5% Senior Notes had an outstanding carrying value of $699.9 million, with a fair value of $623.7 million; a 1% increase in interest rates would decrease the fair value by approximately $21.2 million [347]. - Starz's variable interest rate programming notes incur SOFR-based interest at a weighted average rate of approximately 6.51%; a quarter point increase in interest rates would result in a $0.2 million increase in annual net interest expense [346]. - Starz's exposure to interest rate risk is significant, as certain borrowings are at variable rates, which could increase debt service obligations if interest rates rise [345]. Corporate Governance and Restrictions - The agreements governing Starz's corporate indebtedness impose restrictive covenants that limit its operational flexibility, including restrictions on incurring additional debt and paying dividends [151]. Currency and Tax Risks - The company does not currently hold foreign exchange contracts to hedge currency risks, which could expose it to credit loss if counterparties fail to perform [344]. - Changes in tax laws could adversely affect Starz's financial condition, particularly if it were to be treated as a U.S. corporation for tax purposes, leading to increased tax liabilities [156].