8th Dec 2020 08:28
(Alliance News) - Moody's Investor Services late Monday upgraded its corporate family rating on Cineworld Group PLC, but retained a negative outlook for the movie house chain.
Moody's said the upgrade of Cineworld's CFR to Caa2 from Caa3 is based on its improved liquidity position following the new debt issuance.
Last month, Cineworld secured "significant additional liquidity", on top of further operational measures which it hopes will deliver "enhanced profitability over the long term".
Cineworld agreed the terms of a new USD450 million three-year non-call facility, which matures on May 23, 2024. After accounting for the new debt facility, Cineworld will have aggregate gross debt financing of USD4.9 billion with a weighted average interest rate of approximately 4.5%.
The new debt facility includes financial and operating covenants and entitles the lenders to appoint a board observer. Cineworld received a waiver of all bank financial covenants until June 2022. It has also extended the maturity of its USD111 million incremental revolving credit facility to May 2024 from December 2020.
"Moody's estimates that pro-forma for this transaction, Cineworld will have around USD300 million of cash on its balance sheet at the end of 2020, assuming the RCF remains fully drawn. Cineworld has guided that its monthly cash burn is around USD60 million whilst cinemas stay closed. Under its base case, which assumes the reopening of cinemas from May 2021, the company believes that it will maintain adequate liquidity headroom during 2021 and beyond," the ratings agency said.
However, Moody's said if the reopening of cinemas is delayed beyond the second quarter of 2021, or cinema admissions don't recover enough for a prolonged period in 2021, Cineworld's liquidity position could weaken again, and it may need to seek additional funding.
Moody's added that the negative outlook on Cineworld's ratings reflects the very high leverage of the company, the uncertainty around attendance levels for theatres after service resumption, and increasing competition from streaming platforms.
Cineworld shares were up 2.4% at 63.78 pence early Tuesday in London.
By Arvind Bhunjun; [email protected]
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