Moody's drops Alliance Films to Caa1

Moody's Investors Service said it downgraded the corporate family and probability-of-default ratings of 3217920 Nova Scotia Co., owned by Alliance Films Holdings Inc. and referred to as Alliance Films, to Caa1 from B2, senior secured first-lien bank credit facility to B2 (LGD2, 29%) from Ba3 and senior secured second-lien bank credit facility to Caa2 (LGD5, 71%) from B3.

The company was formerly known as Motion Picture Distribution Finance Co.

The downgrade incorporates expectations that the company may violate the financial covenant in its credit agreement for the June quarter without an amendment or equity cure, the agency said, as well as concerns over weak operating performance and increasing competition.

Alliance Films' Caa1 corporate family rating reflects high leverage, weak liquidity and risk associated with film quality and contract renewal, Moody's noted.

A valuable library of titles as well as considerable scale and market share in the Canadian distribution market support the ratings, the agency said.

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