Moody's rates new IMAX notes B3

Moody's Investors Service said it assigned a B3 rating to the proposed $160 million offering of senior unsecured notes to be issued by IMAX Corp.

The company's senior implied rating under the proposed recapitalization is B3 (vs. Caa2 currently), and the rating outlook is stable (vs. negative currently).

Moody's said it expects that the proceeds from this issue will be used to redeem remaining amounts outstanding (about $153 million) of the company's 7.875% senior unsecured notes due 2005.

Moody's said the ratings for the new notes reflect the company's still high financial leverage and low coverage of fixed charges; lingering uncertainties about prospects for future growth driven by the company's strategy of promoting IMAX as a new release window for major Hollywood event films; concerns about liquidity given the company's lumpy order flow and modest liquidity backstop; and the somewhat intangible nature of the company's assets, which may not provide adequate coverage of all obligations in a downside scenario.

While the initial success of the releases of the Matrix: Reloaded and Matrix: Revolutions using the DMR process suggest that IMAX has gained some momentum in its strategy of promoting IMAX as a new release window, Moody's suggests that the company will need to demonstrate further results from continued streams of new commercial releases and, more importantly, sustained growth in new system signings and installations.

Moody's is also concerned by IMAX's liquidity, which is best characterized as adequate.

While the company's liquidity position will be improved by the closing of a $20 million revolving credit backstop (unrated), Moody's is still concerned about financial flexibility given the fairly modest free cash flow expectations going forward, which are in turn dependent upon continued system installations.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.