Moody’s may downgrade AMC

Moody's Investors Service said it placed the B1 corporate family ratings on AMC Entertainment Inc. under review for downgrade, along with its B1-PD probability of default rating.

The Ba1 senior secured rating and B2 senior subordinate rating on AMC Entertainment Holdings, Inc. also were placed on downgrade review.

This action follows news that AMC will purchase Nordic Cinema Group AB for about $929 million, Moody’s said.

The review for downgrade will focus on the permanent financing for the transaction, historical financial results of the target company translated into U.S. dollars and U.S. GAAP, the agency said, as well as management's financial policies and capital allocation decisions, including its debt-financed mergers and acquisitions growth strategy for the consolidated company going forward.

The company’s speculative grade liquidity rating is unchanged at SGL-2.

AMC's ratings consider the company's dividend and capital expenditure-burdened free cash flow and the constraints imposed by a mature U.S. box office, which has experienced a secular decline in attendance, Moody’s said.

The company is dependent on a limited number of movie studios, seasonality and unpredictable box office results, the agency said, and emerging competitive threats from new entrants aggressively searching for ways to deliver movies through new distribution systems.

Despite these challenges, the company is currently one of the four largest operators in the United States, Moody’s noted.

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