Fitch lowers Regal notes to B/RR5

Fitch Ratings said it affirmed the issuer default ratings of Regal Entertainment Group and Regal Cinemas Corp. at B+.

In addition, the agency downgraded the holding company senior unsecured notes to B/RR5 from B+/RR4, reflecting the reduced recovery prospects for the notes due to the higher proportion of senior secured debt in the capital structure.

Fitch affirmed all other issue ratings. The outlook remains stable.

“The ratings reflect Regal's size and scale as the second largest theatre exhibitor in the U.S., Fitch's belief that theatre exhibitors will remain an important window for film studios' largest releases, and that the company's investments in re-seating and expanding food and beverage offerings are prudent given the long-term secular pressures on movie attendance and will provide the company with opportunities to expand revenue per patron over the rating case,” the agency said in a news release.

“Fitch also acknowledges the company's high gross adjusted leverage of 5.6x, the inherent top-line volatility of the industry given its reliance on film studios for product and the high degree of operating leverage of the business model, and our expectation that most of cash flow will be deployed to theatre upgrades and shareholder returns.”

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