24th Mar 2020 16:52
(Alliance News) - Moody's Investor Services, on Tuesday, downgraded Cineworld Group PLC's corporate family rating to B3 from B1.
The credit ratings agency has also placed the cinema-owner on review for a further downgrade.
Among the ratings downgrades, include: lowering Cineworld's probability of default rating to B3-PD from B1-PD; and the ratings on the USD3.38 billion and the EUR212 million of Senior Secured Term Loan borrowed by Cineworld Finance US to B3 from B1.
"The two notch ratings downgrade is triggered by the temporary closures of all of Cineworld's cinema theatres in the US and Europe. Closures have been mandated by the national governments in the light of the widespread outbreak of coronavirus across the globe," Moody's explained.
Senior credit officer and lead analyst for Cineworld Gunjan Dixit added: "Moody's adjusted gross leverage for Cineworld was already high at around 5.5x at the end of 2019 and we now expect it to rise towards or above 6.5x in 2020. We also expect the company to heavily rely on its revolving credit facility for its cash needs during the year."
The review, Moody's said, was instigated due to uncertainty over Cineworld's ability to reduce its cost base quickly enough and the company's ability to secure a covenant waiver for its June 2020 and December 2020 test.
Moody's is also concerned Cineworld will not be able to secure governmental assistance for its US cinema chain, Regal.
"The review will also take into consideration the developments related to the acquisition of Cineplex, which will result in a material increase in Cineworld's adjusted leverage, if concluded. However, in Moody's opinion the chances of this acquisition concluding as planned are low," Moody's added.
Moody's plans to conclude the review of the ratings over the coming weeks. The review may result in a further downgrade, particularly if the company fails to address its liquidity concerns in a timely manner, the ratings agency said.
Shares in Cineworld closed 31% higher in London on Tuesday at 53.36 pence each.
By Paul McGowan; [email protected]
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