S&P rates Kerasotes loan B

Standard & Poor's said it assigned its B corporate credit rating to Kerasotes Showplace Theatres Holdings LLC. At the same time, S&P assigned its B rating and a recovery rating of 4 to Kerasotes operating subsidiary Kerasotes Showplace Theatres LLC's proposed $300 million senior secured bank credit facility.

The outlook is stable.

Proceeds from the $200 million bank term loan and $27 million in common equity from Providence Equity Partners will be used to repay about $109 million in existing bank debt and to fund a $100 million dividend. The $100 million revolving credit portion of the facility will be undrawn at closing and will be used, together with operating cash flow, to fund Kerasotes' theater expansion and renovation plans.

S&P said the ratings on Kerasotes reflect the risks related to the company's aggressive expansion plan, its high pro forma leverage following the large shareholder dividend, its somewhat older theater portfolio, its significant cash flow concentrations, and the mature and highly competitive nature of the industry. These risks are only partially mitigated by the company's strong regional market position, its leading EBITDA margins, and the operating flexibility provided by its high degree of theater ownership (about 60% of its venues).

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