Fitch: AMC Entertainment Inc.'s Ratings Unaffected by Acquisition of Starplex Cinemas

NEW YORK--()--The ratings of AMC Entertainment Inc. (AMC) are unaffected following AMC's announced acquisition of Starplex Cinemas (Starplex), according to Fitch Ratings. The acquisition would add 33 theaters and 346 screens to AMC's portfolio. The transaction is expected to close by the end of 2015.

Fitch believes Starplex's portfolio is complementary to AMC's portfolio. The acquisition is consistent with Fitch's expectations that AMC will continue to focus on deploying capital towards reseating and the acquisition of theatre assets. In addition, Fitch believes the quality of assets is high given 90 screens have already been re-seated and AMC plans to reseat more screens in Starplex's portfolio. There is also minimum geographic overlap between AMC theaters and Starplex theaters, allowing AMC to expand its footprint in small-mid size markets.

AMC has demonstrated traction in key strategic initiatives, as can be seen in its improving admission revenue per attendee, concession revenue per attendee, and concession gross profit per attendee. Fitch calculates March 31, 2015 latest 12 months (LTM) EBITDA margins of 15.9% (excludes National Cinemedia distribution), an improvement from 13.6% at Sept. 27, 2012. Fitch recognizes that AMC's expected investment into premium food offerings will pressure high concession margins; however, growth in the top line should grow absolute gross profit dollars in this segment. AMC's various strategic initiatives contributed to the company's operating performance resilience during 2014 (admission revenue decline of 4.5% vs. industry-wide decline of 5.2%).

The acquisition price of $172 million will consist of cash. AMC expects to fund the acquisition with cash on hand and borrowings under the revolving credit facility. Fitch estimates liquidity of $145 million in cash ($3 million held at Holdings) and $137 million of availability (as of March 31, 2015) under AMC's $150 million revolving credit facility due April 2018.

Through improvements in operations and reduction in absolute levels of debt, AMC has driven unadjusted gross leverage from 8.7x in 2011 to Fitch estimated 4.1x as of March 31, 2015. Fitch expects gross leverage to decline below 4x by year-end 2015 due to EBITDA growth.

Additional information is available on www.fitchratings.com

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Contacts

Fitch Ratings
Rachael Shanker
Associate Director
+1-212-908-0649
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
David Peterson
Senior Director
+1-312-368-3177
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Rachael Shanker
Associate Director
+1-212-908-0649
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
David Peterson
Senior Director
+1-312-368-3177
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com