Fitch Cuts Outlook for Cineplex to Negative

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As a dedicated fan, I’d like to share that my perspective has shifted due to Fitch Ratings adjusting their outlook on Cineplex‘s debt rating. They’ve moved from stable to negative, primarily because of the perceived size constraint that might be hindering the Canadian cinema titan in its post-pandemic recovery process.

Fitch has confirmed the long-term creditworthiness of the significant Canadian exhibition company as ‘B’, however, they’ve lowered the rating for a $100 million senior secured revolving credit facility and a $575 million senior secured notes to ‘BB’.

The pessimistic viewpoint indicates worries about securing profit increases after 2024’s film supply disruption, preserving audience numbers as streaming services intensify their competition, particularly for smaller films, and adjusting to a more compact release plan for movies,” the agency remarked in its analysis.

Fitch noted that Cineplex’s long-term debt rating is bolstered by its control of 73% of the Canadian box office market, as well as various income sources such as its out-of-home family entertainment centers and digital media ventures. However, it’s important to remember that Hollywood box office revenue is still Cineplex’s primary source of income.

Fitch contends that Cineplex’s less extensive size, traditionally lower earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, and inferior free cash flow compared to American counterparts warranted a downgrade in outlook. Despite this, during its latest fourth quarter, Cineplex managed to report profits of $3.3 million, or 5 cents per share, due to the recovery of Hollywood’s box office from the pandemic, as opposed to a loss of $9 million, or 14 cents per share, in the same period the previous year.

However, Fitch contends that Cineplex, much like its fellow industry players, has not consistently attained pre-pandemic cinema attendance levels seen in 2019. Given the potential for future disruptions within the industry, any benefits derived from increased ticket prices and concessions per customer may be eroded by elevated operating costs.

As per Fitch’s report, Cineplex’s total debt stood at approximately $791.3 million on December 31, 2024. This debt consisted of $575 million in senior secured notes and an additional $216.3 million in unsecured convertible notes.

Fitch’s report reveals that Cineplex owed a total of about $791.3 million as debt on December 31, 2024. This debt was made up of $575 million in senior secured notes and another $216.3 million in unsecured convertible notes.

Or simply:

As Fitch reported, Cineplex had a total debt of roughly $791.3 million on December 31, 2024. This debt consisted of $575 million in senior secured notes and $216.3 million in unsecured convertible notes.

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2025-03-03 19:25