Regal Cinemas emerged from Chapter 11 with a Moody's Investors Service rating of B1 on its $370 million senior secured exit financing after the company eliminated two-thirds of its debt and strengthened its balance sheet. "I think Regal will hopefully do whatever it can to improve its operating performance in order to be able to withstand any short-run or long-term market disturbances," said Russell Solomon, analyst at Moody's.
The favorable rating anticipates a strong movie season as well as the smooth closing of the company's weakest theatres. "Over the next several years we expect that many theatres will be closed, which will improve the industry's health overall," added Solomon. Investors are also expecting a strong performance from the company as the term loan "B" of its new loan blew out two weeks ago with over 60 accounts signing on. Before restructuring, the company's operating performance was weak, as it did not have the cash flow it needed to service its debt obligations, he noted. Since then, Regal has been freed from the obligation of the leases on its underperforming theatres that have failed to bring in the clients and the revenue the company needed. This move represents a 25% reduction of properties and an 80% reduction in the debt burden associated with $800 million in outstanding high-yield bonds.
Through its re-leveraged balance sheet, and stricter bond covenants, including restrictions on capital expenditures, Regal should be able to focus on and improve its more profitable locations. An increase from seven to twelve screens per theatre is also expected. Amy Miles, senior v.p., cfo, and treasurer of Regal, could not be reached for comment.