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10 Aug 2010
$275 million of new debt instruments rated; outlook stable
New York, August 10, 2010 -- Moody's Investors Service (Moody's) assigned a B3 rating to Regal Entertainment
Group's (Regal or the company) proposed new $275 million
senior unsecured note issuance. Regal is the publicly traded parent
holding company of Regal Cinemas Corporation's (Regal Cinemas).
Proceeds from the new issue will be used to retire Regal's $200
million of 6.25% convertible notes due 2011 and repay the
$52 million residual from a former $200 million 9.3875%
senior subordinated notes offering by Regal Cinemas, with the remainder
used to pay fees and expenses and for general corporate purposes.
Consequently, when viewed on a consolidated basis, the issue
merely substitutes debt for debt (and junior-ranking capital for
like-kind junior-ranking capital) and is deemed neutral
to Regal's overall credit profile as represented by the B1 corporate
family rating (CFR), B1 probability of default rating (PDR),
stable rating outlook and SGL-1 speculative grade liquidity rating
(indicating very good liquidity). Loss Given Default Assessments
and specific point estimates have been updated to reflect the change in
Regal operates in an industry that has solid fundamentals; cinema
operation is characterized by relatively stable demand and the business
model is recession-tested. These dynamics allow ratings
for industry participants to tolerate more financial leverage than would
otherwise be the case. Regal's ratings reflect the company's otherwise
relatively high leverage. Ratings also reflect the advantages of
Regal's industry-leading scale and significant geographic diversity.
However, the company has low growth prospects and short-term
results are sensitive to product variability from movie studios.
Regal's recent performance has been fairly consistent; however,
the company has not generated more than nominal free cash flow.
And with growth rates of United States-based cinema operators likely
to be at a discount to the rate of general economic expansion -
which, in turn, is also likely to be relatively modest -
free cash flow expansion in future periods is likely to be challenging.
..Issuer: Regal Entertainment Group
....Senior Unsecured Regular Bond/Debenture,
Assigned B3, LGD6, 94%
..Issuer: Regal Entertainment Group
....Outlook, Changed To Stable From
Moody's most recent rating action concerning Regal was taken on May 6,
2010, at which time, among other things, the company's
bank credit facility was rated Ba3.
Applying our Loss Given Default Methodology to the capital structure on
a pro forma basis and as of the most recent financial statement date suggests
that a Ba2 rating may be appropriate for the bank credit facility;
however, modest changes in the capital structure, such as
even partial use of the $200 million accordion feature, would
immediately imply a Ba3 rating. The Ba3 facility rating consequently
considers our assessment of the likelihood of such prospective future
changes in capital mix. Similarly, the senior unsecured notes
are on the cusp of being rated B2 and B3, and we have opted to rate
the senior unsecured notes B2, noting the aforementioned risk of
potential downgrade should additional senior secured debt be introduced
into the consolidated capital structure. Ratings for these instruments
Upon completion of the refinancing transaction, as per usual practice,
we will relocate the CFR, PDR, outlook and SGL rating to Regal
from Regal Cinemas. As well, our database will be updated
to account for the company's May $200 million add-on
notes issue not being completed as was then planned.
For additional commentary, please refer to the associated Credit
Opinion (available on Moodys.com shortly after the date of this
Regal's ratings were assigned by evaluating factors Moody's believes
are relevant to the credit profile of the issuer, such as i) the
business risk and competitive position of the company versus others within
its industry, ii) the capital structure and financial risk of the
company, iii) the projected performance of the company over the
near to intermediate term, and iv) management's track record and
tolerance for risk. These attributes were compared against other
issuers both within and outside of Regal's core industry and Regal's ratings
are believed to be comparable to those of other issuers of similar credit
risk. Other methodologies and factors that may have been considered
in the process of rating these issuers can also be found in the Credit
Policy & Methodologies directory.
Regal Entertainment Group is the parent company of Regal Entertainment
Holdings, Inc., which is the parent company of Regal
Cinemas Corporation and its subsidiaries. The Company operates
a theatre circuit in the United States, consisting of 6,777
screens in 547 theatres in 38 states and the District of Columbia.
Regal develops, acquires and operates multi-screen theatres
primarily in mid-sized metropolitan markets and suburban growth
areas of larger metropolitan markets throughout the United States.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Canada Inc.
Moody's Investors Service
Moody's rates Regal Entertainment's $275 mm bond issue B3
250 Greenwich Street
New York, NY 10007
No Related Data.
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