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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2025-08-14 compared with 2025-02-10 · 22 added, 37 removed, 12 unchanged (83% of the section changed)

3 unchanged sentences

Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered into during the normal course of business.

Our exposure to foreign currency exchange risk is related to transactions in currencies other than the U.S.

As part of our overall risk management program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an ongoing basis.

Hedges and derivative financial instruments will continue to be used in the future in order to manage our interest rate and currency exposure.

We have no intention of entering into financial derivative contracts, other than to hedge a specific financial risk.

See Note 17 to our unaudited condensed consolidated financial statements for additional information on our financial instruments, and see Part II, Item 7A.

“Quantitative and Qualitative Disclosures About Market Risk” found in our Form 10-K.

Certain of our borrowings, primarily borrowings under our Senior Credit Facilities, eOne IP Credit Facility, LG IP Credit Facility and our film related obligations are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

The applicable margin with respect to loans under the revolving credit facility and Term Loan A is a percentage per annum equal to SOFR plus 0.10% plus 1.75% margin.

Advances under the eOne IP Credit Facility and LG IP Credit Facility bear interest at a rate equal to Term SOFR plus 2.25% per annum.

Assuming the revolving credit facility is drawn up to its maximum borrowing capacity of $1.25 billion, based on the applicable SOFR in effect as of December 31, 2024, each quarter point change in interest rates would result in a $6.0 million change in annual net interest expense on the revolving credit facility, Term Loan A, eOne IP Credit Facility, LG IP Credit Facility and interest rate swap agreements.

The variable interest film related obligations (which includes our production loans, programming notes, Production Tax Credit Facility, Film Library Facility, Backlog Facility and other) incur primarily SOFR-based interest, with applicable margins ranging from 0.25% to 3.25% per annum.

A quarter point increase of the interest rates on the variable interest film related obligations would result in $3.3 million in additional costs capitalized to the respective film or television asset for production loans and programming notes (based on the outstanding principal amount of such loans), and a $1.6 million change in annual net interest expense (based on the outstanding principal amount of such loans, and assuming the Production Tax Credit Facility and Backlog Facility are utilized up to their maximum capacity of $260.0 million and $175.0 million, respectively).

At December 31, 2024, our 5.5% Senior Notes and Exchange Notes had an outstanding carrying value of $699.1 million, and an estimated fair value of $604.9 million.

A 1% increase in the level of interest rates would decrease the fair value of the

5.5% Senior Notes by approximately $21.6 million, and a 1% decrease in the level of interest rates would increase the fair value of the 5.5% Senior Notes by approximately $22.6 million.

Hedges and derivative financial instruments may be used in the future to manage our interest rate exposure.

We only enter financial derivative contracts- to hedge a specific financial risk.

Currency Rate Risk.

The Company entered into forward foreign exchange contracts during the quarter ended June 30, 2025 to hedge our foreign currency exposures on future programming production costs denominated in British Pounds.

These contracts are entered into with major financial institutions as counterparties.

Refer to Note 13, Derivative Instruments and Hedging Activities , for further details.

Interest Rate Risk.

The Company entered into interest rate swap contracts during the quarter ended June 30, 2025 to mitigate the impact of interest rate changes on earnings and cash flows.

Refer to Note 13, Derivative Instruments and Hedging Activities , for further details.

Certain of our borrowings, primarily borrowings under our credit facilities, are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

The Company’s objective is to mitigate the impact of interest rate changes on earnings and cash flows and has entered into $150.0 million worth of pay-fixed interest rate swaps to facilitate its interest rate risk management activities.

Pay-fixed swaps effectively convert floating-rate borrowings to fixed-rate borrowings.

Our variable interest rate programming notes incur SOFR-based interest at a weighted average rate of approximately 8.8%.

At June 30, 2025, our Term Loan A had an outstanding carrying value of $300.0 million, with a fair value of $292.9 million, and our 5.5% Senior Notes had an outstanding carrying value of $325.1 million, with a fair value of $258.2 million.

The following table presents information about our financial instruments that are sensitive to changes in interest rates.

The table also presents the cash flows of the principal amounts of the financial instruments, or the cash flows associated with the notional amounts of interest rate derivative instruments, and related weighted-average interest rates by expected maturity or required principal payment dates and the fair value of the instrument as of December 31, 2024:

Three Months Ending March 31, Year Ending March 31, Fair Value

2025 2026 2027 2028 2029 Thereafter Total December 31,

Year Ended December 31, Fair Value

2026 2027 2028 2029 2030 Thereafter Total June 30, 2025

(Amounts in millions)

Variable Rates :

Revolving Credit Facility (1)

$ — $ — $ 390.0 $ — $ — $ — $ 390.0 $ 390.0

Average Interest Rate — — 6.18 % — — —

Term Loan A $ — $ — $ — $ — $ 300.0 $ — $ 300.0 $ 292.9

— — 314.4 — — — 314.4 313.6

Average Interest Rate 7.3 %

eOne IP Credit Facility (1)

8.5 34.0 34.0 34.0 34.0 187.0 331.5 331.5

Average Interest Rate 6.58 % 6.58 % 6.58 % 6.58 % 6.58 % 6.58 %

LG IP Credit Facility (1)

21.2 85.0 85.0 85.0 85.0 488.8 850.0 850.0

Average Interest Rate 6.58 % 6.58 % 6.58 % 6.58 % 6.58 % 6.58 %

Film related obligations (2)

469.7 1,208.0 — 268.4 — — 1,946.1 1,946.1

Programming notes $ 88.2 $ — $ — $ — $ — $ — $ 88.2 $ 88.2

Average Interest Rate 8.8 % — — — — —

5.5% Senior Notes $ — $ — $ — $ — $ 325.1 $ — $ 325.1 $ 258.2

Interest Rate — — — — — 5.50 %

Interest Rate Swaps (3)

Variable to fixed notional amount — — 345.0 — — — 345.0 0.7

____________________

(1) The effective interest rate in the table above is before the impact of interest rate swaps.

(2) Represents amounts outstanding under film related obligations (i.e., production loans, Production Tax Credit Facility, programming notes, Backlog Facility and other, and Film Library Facility), actual amounts outstanding and the timing of expected future repayments may vary in the future (see Note 7 to our unaudited condensed consolidated financial statements for further information).

(3) Represents interest rate swap agreements on certain of our SOFR-based floating-rate debt with fixed rates paid ranging from 3.803% to 4.045% with maturities in August 2026, September 2026 and December 2026.

See Note 17 to our unaudited condensed consolidated financial statements.

Average Interest Rate — — — — 5.5 % —

STARZ ENTERTAINMENT CORP.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk