Corporate Debt | 3 Months Ended |
Jun. 30, 2014 |
Long-term Debt and Capital Lease Obligations [Abstract] | ' |
Corporate Debt | ' |
Corporate Debt |
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The total carrying values of corporate debt of the Company, excluding film obligations and production loans, were as follows as of June 30, 2014 and March 31, 2014: |
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| June 30, 2014 | | March 31, 2014 | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Senior revolving credit facility | $ | 84,000 | | | $ | 97,619 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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5.25% Senior Notes | 225,000 | | | 225,000 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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July 2013 7-Year Term Loan, net of unamortized discount of $2,158 (March 31, 2014 - $2,247) | 222,842 | | | 222,753 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Convertible senior subordinated notes, net of unamortized discount of $8,805 (March 31, 2014 - $10,397) | 133,255 | | | 131,788 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| $ | 665,097 | | | $ | 677,160 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following table sets forth future annual contractual principal payment commitments of corporate debt as of June 30, 2014: |
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| | Conversion Price Per Share | | Maturity Date or Next Holder Redemption Date (1) | | Year Ended March 31, |
Debt Type | | | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | Thereafter | | Total |
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Senior revolving credit facility | | N/A | | Sep-17 | | $ | — | | | $ | — | | | $ | — | | | $ | 84,000 | | | $ | — | | | $ | — | | | $ | 84,000 | |
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5.25% Senior Notes | | N/A | | Aug-18 | | — | | | — | | | — | | | — | | | 225,000 | | | — | | | 225,000 | |
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July 2013 7-Year Term Loan | | N/A | | Jul-20 | | — | | | — | | | — | | | — | | | — | | | 225,000 | | | 225,000 | |
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Principal amounts of convertible senior subordinated notes: | | | | | | | | | | | | | | | | | | |
April 2009 3.625% Notes | | $8.21 | | Mar-15 | | 40,210 | | | — | | | — | | | — | | | — | | | — | | | 40,210 | |
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January 2012 4.00% Notes | | $10.44 | | Jan-17 | | — | | | — | | | 41,850 | | | — | | | — | | | — | | | 41,850 | |
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April 2013 1.25% Notes | | $29.84 | | Apr-18 | | — | | | — | | | — | | | — | | | 60,000 | | | — | | | 60,000 | |
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| | | | | | $ | 40,210 | | | $ | — | | | $ | 41,850 | | | $ | 84,000 | | | $ | 285,000 | | | $ | 225,000 | | | 676,060 | |
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Less aggregate unamortized discount | | | | | | | | | | | | | | (10,963 | ) |
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-1 | The future repayment dates of the convertible senior subordinated notes represent the next redemption date by holders for each series of notes respectively, as described below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Senior Revolving Credit Facility |
Availability of Funds. At June 30, 2014, there was $715.9 million available (March 31, 2014 — $702.3 million) under the senior revolving credit facility. The senior revolving credit facility provides for borrowings and letters of credit up to an aggregate of $800 million. The availability of funds is limited by a borrowing base and also reduced by outstanding letters of credit which amounted to less than $0.1 million at June 30, 2014 (March 31, 2014 — $0.1 million). |
Maturity Date. The senior revolving credit facility expires September 27, 2017. |
Interest. Interest is payable at an alternative base rate, as defined, plus 1.5%, or LIBOR plus 2.5% as designated by the Company. As of June 30, 2014, the senior revolving credit facility bore interest of 2.5% over the LIBOR rate (effective interest rate of 2.66% and 2.65% on borrowings outstanding as of June 30, 2014 and March 31, 2014, respectively). |
Commitment Fee. The Company is required to pay a quarterly commitment fee of 0.375% to 0.5% per annum, depending on the average balance of borrowings outstanding during the period, on the total senior revolving credit facility of $800 million less the amount drawn. |
Security. Obligations under the senior revolving credit facility are secured by collateral (as defined in the credit agreement) granted by the Company and certain subsidiaries of the Company, as well as a pledge of equity interests in certain of the Company’s subsidiaries. |
Covenants. The senior revolving credit facility contains a number of covenants that, among other things, require the Company to satisfy certain financial covenants and restrict the ability of the Company to incur additional debt, pay dividends, make certain investments and acquisitions, repurchase its stock, prepay certain indebtedness, create liens, enter into agreements with affiliates, modify the nature of its business, enter into sale-leaseback transactions, transfer and sell material assets and merge or consolidate. As of June 30, 2014, the Company was in compliance with all applicable covenants. |
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Change in Control. Under the senior revolving credit facility, the Company may also be subject to an event of default upon a change in control (as defined in the credit agreement) which, among other things, includes a person or group acquiring ownership or control in excess of 50% of the Company’s common shares. |
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5.25% Senior Notes and July 2013 7-Year Term Loan |
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In July 2013, contemporaneous with the redemption of the 10.25% Senior Notes discussed below, Lions Gate Entertainment Corp. issued $225.0 million aggregate principal amount of 5.25% Senior Secured Second-Priority Notes (the "5.25% Senior Notes"), and entered into a seven-year term loan (the "July 2013 7-Year Term Loan"), for an aggregate amount of $222.5 million, net of an original issue discount of $2.5 million (collectively, the "New Issuances"). Transaction costs of $4.2 million relating to these borrowings were capitalized as deferred financing costs and are being amortized to interest expense using the effective interest method over the terms of the respective borrowings. Transaction costs of $2.6 million relating to the portion of these borrowings deemed to be a modification of terms with creditors participating in both the New Issuances and the 10.25% Senior Notes redemption were expensed as an early extinguishment of debt in the quarter ended September 30, 2013. |
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Interest: |
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(i) | 5.25% Senior Notes: Interest is payable semi-annually on February 1 and August 1 of each year at a rate of 5.25% per year, and commenced on February 1, 2014. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(ii) | July 2013 7-Year Term Loan: Bears interest by reference to a base rate or the LIBOR rate, plus an applicable margin of 3.00% or 4.00%, respectively. The base rate is subject to a floor of 2.00%, and the LIBOR rate is subject to a floor of 1.00%. In the case of LIBOR loans, interest is paid according to the respective LIBOR maturity, and in the case of base rate loans, interest is paid quarterly on the last business day of the quarter. The effective interest rate on borrowings outstanding as of June 30, 2014 was approximately 5.00% (March 31, 2014 - 5.00%). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Maturity: |
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(i) | 5.25% Senior Notes: August 1, 2018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(ii) | July 2013 7-Year Term Loan: July 19, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Guarantees. The respective borrowings are guaranteed by all of the restricted subsidiaries of the Company that guarantee any material indebtedness of the Company or any other guarantor, subject, in the case of certain special purpose producers, to receipt of certain consents. |
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Security Interest and Ranking. The respective borrowings and the guarantees are secured by second-priority liens on substantially all of the Company’s and the guarantors’ tangible and intangible personal property, subject to certain exceptions and permitted liens. The 5.25% Senior Notes rank equally in right of payment with all of the Company’s existing and future debt that is not subordinated in right of payment to the 5.25% Senior Notes and July 2013 7-Year Term Loan, including the Company’s existing convertible senior subordinated notes. The respective borrowings are structurally subordinated to all existing and future liabilities (including trade payables) of the subsidiaries that do not guarantee the 5.25% Senior Notes and July 2013 7-Year Term Loan. |
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Optional Redemption or Prepayment: |
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(i) | 5.25% Senior Notes: Redeemable by the Company, in whole or in part, at a price equal to 100% of the principal amount, plus the Applicable Premium, as defined in the indenture governing the 5.25% Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption. The Applicable Premium amounts to the greater of (i) 1.0% of the principal amount redeemed and (ii) the excess of the present value of the principal amount of the notes redeemed plus interest through the maturity date over the principal amount of the notes redeemed on the redemption date. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(ii) | July 2013 7-Year Term Loan: The Company may voluntarily prepay at any time, provided that if prepaid (i) on or before July 19, 2015, the Company shall pay to the lenders a prepayment premium of 2.0% on the principal amount prepaid; (ii) after July 19, 2015 and on or before July 19, 2016, the Company shall pay to the lenders a prepayment premium of 1.0% on the principal amount prepaid; and (iii) after July 19, 2016, no prepayment premium shall be payable. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Change of Control. The occurrence of a change of control will be a triggering event requiring the Company to offer to purchase from holders some or all of the 5.25% Senior Notes, or prepay some or all of the July 2013 7-Year Term Loan, at a price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase or prepayment. In addition, certain asset dispositions will be triggering events that may require the Company to use the excess proceeds from such dispositions to make an offer to purchase the 5.25% Senior Notes, or prepay the July 2013 7-Year Term Loan, at 100% of their principal amount, plus accrued and unpaid interest, if any to the date of purchase or prepayment. |
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Covenants. The 5.25% Senior Notes and July 2013 7-Year Term Loan contain certain restrictions and covenants that, subject to certain exceptions, limit the Company’s ability to incur additional indebtedness, pay dividends or repurchase the Company’s common shares, make certain loans or investments, and sell or otherwise dispose of certain assets subject to certain conditions, among other limitations. As of June 30, 2014, the Company was in compliance with all applicable covenants. |
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10.25% Senior Notes |
In June 2013, Lions Gate Entertainment, Inc. ("LGEI"), the Company's wholly-owned subsidiary, paid $4.3 million to repurchase $4.0 million of aggregate principal amount (carrying value - $4.0 million) of the 10.25% Senior Secured Second-Priority Notes (the "10.25% Senior Notes"). The Company recorded a loss on extinguishment in the quarter ended June 30, 2013 of $0.5 million, which included $0.2 million of deferred financing costs written off. |
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In July 2013, the Company called for early redemption of the $432.0 million remaining outstanding principal amount of the 10.25% Senior Notes. The 10.25% Senior Notes were due November 1, 2016, but were redeemable by the Company at any time prior to November 1, 2013 at a redemption price of 100% of the principal amount plus the Applicable Premium, as defined in the indenture, and accrued and unpaid interest to the date of redemption. In July 2013, the proceeds from the issuance of the 5.25% Senior Notes and the July 2013 7-Year Term Loan discussed above, whose principal amount collectively totaled $450.0 million, together with cash on hand and borrowings under the Company's senior revolving credit facility, were used to fund the discharge of the 10.25% Senior Notes. In conjunction with the early redemption of the 10.25% Senior Notes, the Company paid $34.3 million, representing the present value of interest through the first call date of November 1, 2013 and related call premium pursuant to the terms of the indenture governing the 10.25% Senior Notes. This, along with $19.8 million of deferred financing costs and unamortized debt discount related to the redeemed notes, will be amortized over the life of the New Issuances to the extent deemed to be a modification of terms with creditors participating in both the New Issuances and the 10.25% Senior Notes redemption. The remaining amount of those costs plus certain New Issuance costs (as discussed above) amounting to $35.9 million in aggregate was expensed as an early extinguishment of debt in the quarter ended September 30, 2013. |
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Convertible Senior Subordinated Notes |
Outstanding Amount. The following table sets forth the convertible senior subordinated notes outstanding at June 30, 2014 and March 31, 2014: |
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| | Conversion Price Per Share as of June 30, 2014 | | June 30, 2014 | | March 31, 2014 | | | | | | |
| | | Principal | | Unamortized | | Net Carrying | | Principal | | Unamortized | | Net Carrying | | | | | | |
Discount | Amount | Discount | Amount | | | | | | |
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Convertible Senior Subordinated Notes | | | | | | | | | | | | | | | | | | | | |
October 2004 2.9375% Notes (1) | | N/A | | $ | — | | | $ | — | | | $ | — | | | $ | 115 | | | $ | — | | | $ | 115 | | | | | | | |
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April 2009 3.625% Notes (1) | | $8.21 | | 40,210 | | | (3,472 | ) | | 36,738 | | | 40,220 | | | (4,605 | ) | | 35,615 | | | | | | | |
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January 2012 4.00% Notes (1) | | $10.44 | | 41,850 | | | (5,333 | ) | | 36,517 | | | 41,850 | | | (5,792 | ) | | 36,058 | | | | | | | |
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April 2013 1.25% Notes (2) | | $29.84 | | 60,000 | | | — | | | 60,000 | | | 60,000 | | | — | | | 60,000 | | | | | | | |
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| | | | $ | 142,060 | | | $ | (8,805 | ) | | $ | 133,255 | | | $ | 142,185 | | | $ | (10,397 | ) | | $ | 131,788 | | | | | | | |
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-1 | The convertible senior subordinated notes provide, with the exception of the 1.25% Convertible Senior Subordinated Notes issued in April 2013 (the "April 2013 1.25% Notes"), at the Company's option, that the conversion of the notes may be settled in cash rather than in the Company's common shares, or a combination of cash and the Company's common shares. Accounting rules require that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are recorded by separately accounting for the liability and equity component (i.e., conversion feature), thereby reducing the principal amount with a debt discount that is amortized as interest expense over the expected life of the note using the effective interest method. The effective interest rate on the liability component of the 3.625% Convertible Senior Subordinated Notes issued in April 2009 (the "April 2009 3.625% Notes") is 17.26%, and the effective interest rate on the liability component of the 4.00% Convertible Senior Subordinated Notes issued in January 2012 (the "January 2012 4.00% Notes") is 9.56%. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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-2 | The April 2013 1.25% Notes are convertible only into the Company's common shares, and do not carry an option to be settled in cash upon conversion. Accordingly, the April 2013 1.25% Notes have been recorded at their principal amount and are not reduced by a debt discount for the equity component. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Expense. The amount of interest expense recognized for the convertible senior subordinated notes, which includes both the contractual interest coupon and amortization of the discount on the liability component, for the three months ended June 30, 2014 and 2013 is presented below. |
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| Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest Expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contractual interest coupon | $ | 973 | | | $ | 1,196 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Amortization of discount on liability component and debt issuance costs | 1,619 | | | 2,096 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| $ | 2,592 | | | $ | 3,292 | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Convertible Senior Subordinated Notes Terms |
April 2009 3.625% Notes. In April 2009, LGEI issued approximately $66.6 million of April 2009 3.625% Notes, of which $16.2 million was allocated to the equity component. |
Outstanding Amount: As of June 30, 2014, $40.2 million of aggregate principal amount (carrying value — $36.7 million) remains outstanding. |
Interest: Interest is payable at 3.625% per annum semi-annually on March 15 and September 15 of each year. |
Maturity Date: March 15, 2025. |
Redeemable by LGEI: Redeemable by the Company on or after March 15, 2015, in whole or in part, at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be redeemed, plus accrued and unpaid interest through the date of redemption. |
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Repurchase Events: The holder may require LGEI to repurchase the April 2009 3.625% Notes on March 15, 2015, 2018 and 2023 or upon a “designated event,” (as defined in the governing indenture), at a price equal to 100% of the principal amount of the April 2009 3.625% Notes to be repurchased plus accrued and unpaid interest. |
Conversion Features: Convertible into common shares of the Company at any time before maturity, redemption or repurchase by the Company, at an initial conversion price of approximately $8.25 per share, subject to adjustment in certain circumstances, as specified in the governing indenture (June 30, 2014 - $8.21). Upon conversion, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company. |
Make Whole Premium: Under certain circumstances, if the holder requires LGEI to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of the Company’s common shares on the effective date of the change in control. No make whole premium will be paid if the price of the Company’s common shares at such time is less than $5.36 per share or exceeds $50.00 per share. |
January 2012 4.00% Notes. In January 2012, LGEI issued approximately $45.0 million of January 2012 4.00% Notes, of which $10.1 million was allocated to the equity component. |
Outstanding Amount: As of June 30, 2014, $41.9 million of aggregate principal amount (carrying value — $36.5 million) remains outstanding. |
Interest: Interest is payable at 4.00% per annum semi-annually on January 15 and July 15 of each year. |
Maturity Date: January 11, 2017. |
Conversion Features: Convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $10.50 per share, subject to adjustment in certain circumstances as specified in the governing indenture (June 30, 2014 - $10.44). Upon conversion, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company. |
April 2013 1.25% Notes. In April 2013, LGEI issued approximately $60.0 million in aggregate principal amount of April 2013 1.25% Notes. |
Outstanding Amount: As of June 30, 2014, $60.0 million of aggregate principal amount (carrying value - $60.0 million) remains outstanding. |
Interest: Interest is payable semi-annually on April 15 and October 15 of each year, and commenced on October 15, 2013. |
Maturity Date: April 15, 2018. |
Conversion Features: Convertible into common shares of the Company at any time prior to maturity or repurchase by the Company, at an initial conversion price of approximately $30.00 per share, subject to adjustment in certain circumstances, as specified in the governing indenture (June 30, 2014 - $29.84). |