Moody's cuts Hit Entertainment

Moody's Investors Service said it downgraded Hit Entertainment Inc.'s corporate family rating to Caa1 from B3, probability of default rating to Caa2 from Caa1, senior secured first-lien bank credit facility to B2 (LGD 2, 18%) from B1 (LGD 2, 18%) and senior secured second-lien loan to Caa3 (LGD 4, 68%) from Caa2 (LGD 4, 68%).

The outlook remains negative.

The downgrades were prompted by the company's ongoing struggle to generate positive free cash flow as it prepares for the mid-2012 maturity of a significant proportion of its credit facilities, Moody's said.

The agency said it thinks that efforts to improve cash flow and results will involve much needed programming investments that will limit free cash flow expansion.

When combined with a lack of forward visibility of the company's licensing-based cash flow, it is not clear how the company's cash flow profile will be perceived by lenders as the maturity of credit facilities approaches, Moody's said.

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