Moody’s confirms AMC, upgrades Carmike notes

Moody’s Investors Service confirmed AMC Entertainment Holdings, Inc.’s existing senior secured term loan at Ba1, confirmed its senior subordinated notes at B2 and upgraded the $230 million of senior secured notes of Carmike Cinemas, Inc. to Ba1 from B1.

Moody’s assigned a B1 corporate family rating, B1-PD probability of default and SGL-2 speculative grade liquidity rating to AMC Entertainment Holdings, Inc. reflecting the merger of AMC Entertainment Inc. into AMC Entertainment Holdings. The outlook is stable.

The confirmation ends a review for downgrade initiated when the company announced an agreement to acquire Nordic Cinema Group coupled with earlier transactions including Odeon & UCI and Carmike.

The Carmike notes are guaranteed by AMC and now benefit from lift provided by substantially more subordinated debt in AMC’s capital structure.

Moody’s said the B1 rating incorporates high leverage that, although expected to improve, is currently above its tolerance for the level, weakly positioning the company in the rating category.

The rating agency projects that leverage, following the recent acquisitions of Carmike, Odeon and Nordic, will approach 5x at the end of 2018, improving from approximately 5.7x pro forma as of March 31, with growth in EBITDA and mandatory term loan amortization.

Despite these challenges, the company is the largest operator in the world, with operations that extend into Europe and the Nordics which contribute over 30% of pro forma revenues. The diversity helps spread geographic risks, thus reducing the direct impact of negative trends in a particular region.

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