Refinance-Minded Summit Receives Two Credit Ratings

“Twilight” producer hopes to refinance $800 million in debt

Summit Entertainment is taking advantage of the mega-grossing "Twilight Saga" series before it concludes in 2013 by refinancing its $800 million debt.

On Wednesday afternoon, Summit received a B rating — a solid but cautious grade — from Standard & Poors. Earlier in the day, Moody’s Investor Service gave the company a B1.

The rating arrives while the "Twilight Saga" series continues to rack up big grosses, putting Summit in a comparatively strong position.

Receiving a rating means that Summit can issue bonds, which would allow the company would pay a lower interest rate than it currently does.

According to Standard & Poors, "We regard Summit's business risk profile as vulnerable because of its narrow business focus, revenue concentration on one movie franchise, and earnings volatility from the timing of hit movie releases."

Standard & Poors also said that Summit has "an aggressive financial risk profile" because it is especially dependent on the two remaining "Twilight" films.

Marla Backer, an analyst with Hudson Square Research, said Moody's B1 is “clearly a speculative grade rating which makes sense, but it’s squarely in the middle to the high end of those speculative ratings.”

Getting ratings also could position Summit for an initial public offering.

An individual close to Summit warned against reading too much into the bond rating. Rather, the source said Summit is flush with money from the "Twilight" series and, consequently, is in a position to borrow money at better terms.

“This is not portending something else,” the individual said. “They’re renegotiating the terms of how they use their money.”

Summit has expressed interest in expanding into television or other areas.

Laura Martin, an analyst with Needham & Co., said the B1 rating is strong.

“It should lower their cost of capital overall,” she said. “It doesn’t address the strategic issues. This is just a form of financing. It addresses financing issues in the future, but not strategic issues like, what are they going to do post-Twilight.”

Moody’s expressed some concern about what Summit will do after the Twilight series ends.

"Summit's B1…reflects the inherent high risk associated with the film business and the company's dependence on new filmproduction, recognizing its modest library portfolio size," Moody's wrote.

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