S&P cuts MGM, rates facilities BB, B-

S&P said it lowered its long-term issuer credit rating on Metro-Goldwyn-Mayer Inc. (MGM) to B+ from BB-. The outlook is stable.

The agency also lowered its issue rating on the company's senior secured credit facility to BB from BB+. The recovery rating remains 1, indicating an expectation of very high recovery (90%-100%; rounded estimate: 90%) of principal in the event of a payment default.

At the same time, the agency assigned its BB issue rating to the company's new senior secured $400 million first-lien term loan and $1.6 billion revolver. The 1 recovery rating indicates an expectation of very high recovery (90%-100%; rounded estimate: 90%).

S&P also assigned its B- issue rating to the new $500 million second-lien term loan. The 6 recovery rating indicates negligible recovery (0%-10%; rounded estimate: 0%).

“The downgrade follows our expectation that MGM is planning to strategically repurchase $260 million of shares from one shareholder,” the agency said in a news release.

“We expect MGM to draw on its RCF to fund the share repurchase, which will increase leverage and further delay its deleveraging plans.”

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