S&P rates Regal Cinemas loan

Standard & Poor's said it assigned its BB- rating to Regal Cinemas Inc.'s proposed $1.75 billion senior secured bank facility.

In addition, S&P affirmed its BB- corporate credit rating on the company and its parent, Regal Entertainment Group, which are analyzed on a consolidated basis. At the same time, a recovery rating of 4 was assigned to the bank loan.

The outlook is negative.

The bank loan will be used to refinance Regal's existing bank debt and bonds, and to fund the extraordinary $710 million debt-financed dividend that was announced on April 15. This is a slight change from its previously announced mixture of bank and subordinated debt, but it does not materially affect the company's financial profile. The company also announced its plans to acquire 37 theaters with 384 screens for $226 million in cash.

S&P said the ratings reflect the mature and highly competitive nature of the movie exhibition industry, exposure to the fluctuating popularity of Hollywood films, and Regal's high leverage and aggressive financial polices.

These concerns are partially mitigated by the company's geographically diverse and relatively high quality theater circuit, good profit margins, and still substantial discretionary cash flow.

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