Cobb Theatres on S&PWatch,Pos;Regal Cinemas Outlk Neg.NEW YORK--(BUSINESS WIRE)--June 12, 1997--NY--Standard & Poor's CreditWire 6/12/97 -- Standard & Poor's today has placed its double-`B'-minus corporate credit rating on Cobb Theatres L.L.C., and its double-`B'-minus rating on the $85 million senior secured debt jointly and severally Jointly and Severally 1. A legal term describing a partnership in which individual decisions are bound to all parties involved and thus undivided. 2. A term used in underwriting syndicates to refer to the distinct responsibility of individual companies to sell a certain issued by Cobb Theatres L.L.C. and Cobb Finance Corp., on CreditWatch with positive implications. The CreditWatch placement is based on Cobb's agreement to be acquired by Regal Cinemas Inc. for common stock valued at $100 million and the assumption of Cobb's $87 million of debt. The rating action reflects the likelihood that the Cobb debt rating will be equalized with Regal's upon completion of the deal, which is expected in July 1997. Standard & Poor's has revised its outlook on Regal to negative from stable and has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its double-`B'-plus corporate credit rating on the Knoxville, Tenn.-based company. The outlook revision is based on the increased financial risk associated with the addition of the Cobb debt as well as debt and cash used by Regal in other recent acquisition and expansion activity. Despite its small size, Birmingham, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. .-based Cobb has an attractive theater portfolio, with good positions mainly in Florida that complement Regal's strength in the Southeast. Cobb has a 9.6 ratio of screens to theaters, affording operating efficiencies that could improve further under combined management with Regal. However, Cobb has a higher risk financial profile, which will weaken Regal's key credit measures. Both Cobb and Regal have been actively expanding their respective theater holdings. Regal has frequently used equity in acquisitions, somewhat mitigating the financial risk impact. Nonetheless, the combined entity is likely to continue to require external financing In the theory of capital structure, External financing is the phrase used to describe funds that firms obtain from outside of the firm. It is contrasted to internal financing which consists mainly of profits retained by the firm for investment. . OUTLOOK: Negative. Maintenance of the rating relies on Regal's restoring key credit measures from the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma levels expected for 1997. In particular, Standard & Poor's expects the company to achieve 2.5 times (x) coverage of earnings before interest, taxes, depreciation, amortization, and operating lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. rent, divided by interest expense plus operating lease rent in 1998. Failure to reach this level of coverage is likely to lead to a downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. . CONTACT: Heather M. Goodchild, 212-208-1606 |
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