S&P: no change to ratings on Regal dividend

Standard & Poor's said its rating and outlook on Regal Entertainment Group and Regal Cinemas Inc. (BB-/stable), which are analyzed on a consolidated basis, are not affected by its plan to increase its quarterly dividend by 20% in 2004.

This action will not affect the company's leverage or coverage ratios, which will remain appropriate for the rating at about 4.5x and 2.6x, respectively. Discretionary cash flow will be reduced somewhat but should remain solid at about 15%-20% of EBITDA, provided that Regal's capital expenditures remain in line with current expectations.

Regal's liquidity is further supported by cash balances of about $155 million at Sept. 30, and the company's undrawn $145 million revolving credit facility. Debt maturities of about $30 million through 2006 are manageable, the ratings agency said.

Still, the higher dividend is a mild concern because it reflects somewhat more aggressive financial policies that reward shareholders and reduce the company's financial flexibility to pursue acquisitions. Rating stability is contingent upon Regal's ability to maintain or slightly improve its key credit measures, continue to generate meaningful positive discretionary cash flow, and maintain good liquidity. The impact of the company's financial policies on its credit profile will continue to be key ratings considerations.

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