Fitch's ratings of Regal Entertainment Group (Regal) and Regal Cinemas
Corporation (Regal Cinemas) are unaffected by Regal's announcement of a
$1 per share special dividend and the acquisition of the Great Escape
theater circuit. A complete list of Fitch's ratings on Regal and Regal
Cinemas is provided below.
Regal announced that it is declaring a special cash dividend of $1 per
share of class A and B common stock, which totals approximately $155
million and is payable on Dec. 27, 2011. Further, Regal announced the
acquisition of Great Escape theater circuit, totaling 25 theaters and
301 screens, for a purchase price of $91 million. Regal disclosed a
pre-synergy multiple of 5.5 times (x), which is consistent with recent
theater acquisition activity. Fitch estimates AMC Entertainment's
acquisition of Kerasotes Showplace at approximately 5.3x.
The special dividend and acquisition is consistent with Fitch's
expectation for Regal's cash deployment. However, while not anticipated,
a debt-financed material acquisition or return of capital to
shareholders that would raise the unadjusted gross leverage beyond 4.5x
could have a negative impact on the ratings.
As of Sept. 30, 2012 Regal had approximately $2 billion in debt, with
and lease-adjusted gross leverage at 4.8x and unadjusted gross leverage
As of Sept. 30, 2012, liquidity was made up of $251 million in cash and
$82 million in credit facility availability (reduced by $3 million in
letters of credit), under the company's $85 million revolving credit
facility due May 2015. Fitch expects the special dividend will be funded
with existing liquidity. While, pro forma September 2012 cash balance
would be low post the special dividend and acquisition, approximately $5
million, the fourth quarter is typically a strong cash generating
quarter. Fitch expects year end liquidity to be adequate, with cash
balances in excess of $50 million and an undrawn credit facility. Fitch
calculates September 2012 last 12 month FCF (after dividends) of $90
The ratings continue to reflect the following key considerations:
--Fitch believes movie exhibition will continue to be a key promotion
window for the movie studios biggest/most profitable releases.
--Solid box office performance, with 2012 box office revenues up 5.8% as
of Nov. 28, according to Box Office Mojo. Fitch expects the remaining
2012 film slate, including the upcoming Hobbit film, to continue to
support the year's growth rate.
--Long-term, Fitch continues to expect that the movie exhibitor industry
will be challenged in growing attendance and any potential attendance
declines will offset some of the growth in average ticket prices.
--The ratings also incorporate the intermediate/long-term risks
associated with increased competition from at-home entertainment media,
limited control over revenue trends, the pressure on film distribution
windows, increasing indirect competition from other distribution
channels (such as DVD, VOD, and the Internet), and high operating
leverage (which could make theater operators FCF negative during periods
of reduced attendance). In addition, RGC and its peers rely on the
quality, quantity, and timing of movie product, all factors out of
Fitch currently rates Regal and Regal Cinemas as follows:
--Issuer Default Rating (IDR) 'B+';
--Senior secured credit facility
--Senior unsecured notes 'BB/RR2'.
The Rating Outlook is Stable.
Additional information is available www.fitchratings.com.
The issuer did not participate in the rating process, or provide
additional information, beyond the issuer's available public disclosure.
Applicable Criteria & Related Research:
Methodology' (Aug. 8, 2012).
Applicable Criteria and Related Research:
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF