The upgrade from “B” follows “the significant improvement in Lionsgate‘s credit metrics since it closed on the acquisition of Summit Entertainment in 2012,” Standard & Poor’s Ratings Services analyst Naveen Sarma says. After paying down some debt, and raking in big profits from movies including The Hunger Games, Lionsgate’s borrowings amount to 4.3 times its cash flow — a steep drop from last year when debt was more than 40 times. The ratio should improve, S&P says, as the studio releases additional Hunger Games films and expands its “more predictable television production revenues.” Although the debt ratings company deems the outlook for Lionsgate to be “stable,” it considers the business risk to be “weak” due to the company’s exposure to the unpredictable film business. “We view the more stable revenue and cash flow from its growing TV production segment (15% of consolidated revenues), and longer-term upside from the growth of digital distribution, as modestly tempering the feature film risks.” Equity investors remain enthusiastic: Lionsgate shares are up 68.5% so far in 2013.

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