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S&P ups Vue, rates loans B, B-, CCC-
S&P said it raised its ratings for Vue Entertainment International Ltd. to CCC+ from SD, Selective Default, and the 95 million super senior debt facility to B from CCC. The agency also assigned B ratings to Vue's new 64 million super-senior facility due June 2027, B- to the new 127 million 1.5 lien senior secured loan due December 2027, and CCC- to the reinstated 229 million senior term loan due December 2027.
The upgrade follows Vue completing its restructuring that reduced its debt and bolstered its liquidity, the agency noted.
The CCC+ issuer credit rating reflects our view that the group will continue to show weak credit metrics and tight liquidity over the next 12-18 months. We anticipate continued weak earnings, and free operating cash flow (FOCF) after lease outflows of close to £100 million in fiscal 2024, owing to a decline in cinema admissions because of a lower number of film releases scheduled for 2024 than in 2023. We expect this will lead to a gradual decline in Vue's cash balance in the near term, and particularly during the fourth quarter (September to November) of fiscal 2024, S&P said in a press release.
The agency said it estimates the group's S&P Global Ratings-adjusted debt to EBITDA at over 9x in fiscal 2024.
On the positive side, Vue aims to offset lower admissions with higher ticket prices to support revenue. The group will continue to roll out dynamic pricing across its sites and optimize its pricing rule set. This includes initiatives such as pricing seats differently, depending on their location within the auditorium, the type of film, the site, or the time and day of the screening. The group has succeeded in this strategy over the last two years, achieving material growth in average ticket prices while maintaining a low entry price point (£4.99 in the U.K.) to attract price-conscious customers and drive market growth, the agency said.
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