Moody's ups Cinemark debt and bonds; notes at B3

Moody's Investors Service said it assigned a B3 (LGD6, 93%) rating to the proposed $200 million of senior subordinated notes of Cinemark USA, Inc. and affirmed its B1 corporate family and probability of default ratings and SGL-1 speculative-grade liquidity rating. Moody's also upgraded Cinemark's secured bank debt to Ba2 (LGD2, 25%) from Ba3 (LGD3, 31%) and its 8 5/8% senior bonds due 2019 to B2 (LGD5, 75%) from B3 (LGD5, 85%).

The outlook is stable.

Cinemark intends to use proceeds primarily to repay about $160 million of outstanding secured term loan that matures in October 2013.

The ratings reflect Cinemark's high leverage, which poses challenge for operating in an inherently volatile industry reliant on movie studios for product to drive the attendance that leads to cash flow from admissions and concessions, the agency said.

Very good liquidity, including a sizeable cash balance, enables the company to better manage attendance related volatility and indicates the ability to improve the credit profile, though the company has to date demonstrated limited desire to do so, the agency added. Cinemark also benefits from scale and geographic diversity, as well as good growth prospects for its international business.

The transaction modestly increases leverage to a 5.3 times debt-to-EBITDA ratio from 5.2 times but favorably extends the maturity profile.

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