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TEXT-S&P rates National CineMedia
2012年11月9日 / 晚上9点43分 / 5 年前

TEXT-S&P rates National CineMedia

     -- U.S.-based theater advertising company National CineMedia LLC is 
amending and extending its senior secured term loan.
     -- We are assigning the amended and extended facilities a 'BB-' 
issue-level rating and a '3' recovery rating, the same as the existing term 
loan ratings.
     -- The stable rating outlook on the corporate credit rating reflects our 
expectation that National CineMedia Inc. will maintain leverage in the
high 3x to 4x range over the intermediate term, despite its aggressive dividend

Rating Action
On Nov. 9, 2012, Standard & Poor's Ratings Services assigned its 'BB-' 
issue-level rating (the same as our 'BB-' corporate credit rating on the 
company) to Centennial Colo.-based National CineMedia LLC's amended and 
extended senior secured credit facilities. The facilities consist of a $265 
million term loan due 2019, a $110 million revolving credit facility due 2017, 
and a $14 million revolving credit facility due 2014 (already rated). We also 
assigned a '3' recovery rating to the term loan and revolving credit facility 
due 2017, indicating our expectation of meaningful (50% to 70%) recovery for 
lenders in the event of a payment default. The proposed transaction extends 
the maturity of the company's term loan B to 2019 from 2015.

We affirmed all other related ratings on the company, including the 'BB-' 
corporate credit rating. The rating outlook is stable. 

We analyze National CineMedia Inc. (NCM Inc.) and operating subsidiary 
National CineMedia LLC on a consolidated basis.

The rating on National CineMedia Inc. reflects Standard & Poor's expectation 
that NCM Inc. will maintain its strong EBITDA margin, its conversion of EBITDA 
to free operating cash flow, and its leverage in the high 3x to 4x range over 
the intermediate term, despite its aggressive dividend policy. We consider the 
company's business risk profile as "fair" (as per our criteria), based on its 
historically strong EBITDA margin and good market position. A high dividend 
payout and minimal cash retention by operating subsidiary NCM LLC underpin our 
view of the company's "aggressive" financial risk profile, despite its 
relatively moderate leverage. 

Operating subsidiary NCM LLC is the larger of two competing in-theater 
advertising networks in North America. Our assessment of NCM Inc.'s "fair" 
business risk stems from the company's high EBITDA margin and long-term 
contracts with the three largest national movie exhibitors in the U.S.: 
American Multi-Cinema Inc., a wholly owned subsidiary of AMC Entertainment 
Inc.; Regal Cinemas Corp., a wholly owned subsidiary of Regal Entertainment 
Group; and Cinemark USA Inc., a wholly owned subsidiary of Cinemark Holdings 
Inc. These contracts provide significant barriers to entry to new entrants in 
addition to revenue visibility. A key risk is that once NCM Inc. is able to 
sell all or nearly all of its inventory, declining theater attendance could 
hurt performance, because national advertisers pay NCM based on a cost per 
thousand viewers (CPM) advertising pricing metric. We believe that there is 
limited pricing upside, given in-theater advertising's already high rates, 
which are roughly comparable to broadcast television. Unlike many other 
advertising media, NCM Inc. has minimal ability to expand its ad inventory 
and, therefore, relies on inventory utilization, ad rate increases, and 
winning theater chain clients from its key competitor, to generate revenue 

Under our base-case scenario, we expect revenue will be flat to up at a low 
single-digit percent rate in the fourth quarter of 2012, reflecting robust 
local advertising growth and weaker national advertising demand. We expect 
that EBITDA will be flat to down at a low double-digit percent rate because of 
higher access fees paid to theaters as a result of the continued expansion of 
the company's screen count. In 2013, we expect revenue and EBITDA to rise at a 
low- to mid-single-digit percentage rate. We expect NCM Inc.'s attendance base 
to increase at a low-single-digit percentage rate as it continues to expand 
its screen count, albeit at a slower rate. We also expect NCM Inc. to continue 
expanding its inventory utilization and rate as a result of expanding the 
number of advertising clients. We estimate NCM Inc.'s EBITDA margin will 
decline about 200 basis points in the fourth quarter as a result of higher 
expenses and remain relatively flat, in the high 40% area in 2013.

In the third quarter of 2012, revenue and EBITDA increased 5.7% and 6.4%, 
respectively, because of an increase in inventory utilization and higher 
advertising rates, partly offset by higher theater access fees. For the 12 
months ended Sept. 27, 2012, the EBITDA margin was strong at 48%--roughly even 
with the prior-year period. Debt to EBITDA for the 12 months ended Sept. 27, 
2012, pro forma for the proposed amendment, increased to 4.0x from 3.4x in the 
prior-year period, because of higher debt balances. Debt will increase by 
about $40 million as a result of the proposed amendment, with the majority of 
the proceeds going to pay fees and to unwind interest rate swaps. Leverage is 
in line with the 4x to 5x range of debt leverage that we regard as indicative 
of an "aggressive" financial risk profile, and the company distributes nearly 
all of its free cash flow to shareholders and its founding members as long as 
leverage remains below 6.5x. EBITDA coverage of interest declined to 3.9x from 
4.9x in the prior-year period as a result of higher interest expense on the 
notes issued in April 2012 and higher debt balances. We expect debt leverage 
to remain in the high 3x to 4x range, based on our outlook for revenue and 
EBITDA growth over the next year.

NCM Inc. converted half of EBITDA into free operating cash flow (one-time swap 
termination fees) in the 12 months ended Sept. 27, 2012. Distributions are 
high, at about 56% of EBITDA for the 12 months ended Sept. 27, 2012. Excluding 
swap termination fees, discretionary cash flow was slightly negative by about 
$13 million (or 6% of EBITDA) for the 12 months ended Sept. 27, 2012, because 
of working capital becoming a greater use of cash flow. We expect NCM LLC to 
continue to distribute more than 90% of its free operating cash flow to its 
founding members and its parent company's shareholders, subject to a leverage 
ceiling of 6.5x. We expect the operating subsidiary to generate good free 
operating cash flow, but that dividends will result in minimal discretionary 
cash flow (less than 10% of EBITDA) and cash.

Liquidity is "adequate" to cover NCM Inc.'s operating and capital needs over 
the next 12 to 18 months, in our view. We believe any further 
shareholder-favoring initiatives could weaken the liquidity profile. Our 
assessment of NCM Inc.'s liquidity profile incorporates the following 
expectations and assumptions:

     -- We expect NCM Inc.'s sources of liquidity over the next 12 to 18 
months will exceed uses by over 1.2x.
     -- We expect that liquidity sources would remain positive, even with a 
15% to 20% EBITDA decline.
     -- We expect NCM Inc. can maintain covenant compliance, even if EBITDA 
drops 15%.
     -- NCM Inc. can absorb high-impact, low-probability adversities by 
reducing its distributions to equity holders.
     -- We believe the company has good relationships with its banks and a 
satisfactory standing in the credit markets.

Liquidity sources include cash balances of $8 million as of Sept. 27, 2012, at 
NCM LLC, our expectation of healthy free operating cash flow, and borrowing 
access under the company's revolving credit facility. The company has access 
to $94 million under the upsized $119 million revolver. Uses of liquidity 
include dividends and distributions to NCM Inc.'s founding members and NCM 
Inc., and working capital requirements and capital expenditures of about $30 
million to $40 million, combined. We believe that NCM will generate funds from 
operations of roughly $170 million to $190 million in 2012 and 2013 (before 
one-time swap termination fees). We expect NCM Inc. to distribute virtually 
all of its free operating cash flow to founding members and to NCM Inc., 
resulting in minimal discretionary cash flow.
NCM had roughly a 55% EBITDA cushion against its senior debt leverage covenant 
on Sept. 27, 2012. We expect it to maintain sufficient covenant headroom over 
the intermediate term.

Recovery analysis
We rate National CineMedia LLC's senior secured credit facilities and senior 
secured notes 'BB-' (the same as the corporate credit rating) with a '3' 
recovery rating. The '3' recovery rating reflects our view that lenders would 
experience meaningful (50% to 70%) recovery in the event of a payment default. 
We rate the company's senior unsecured notes 'B' (two notches below the 
corporate credit rating) with a recovery rating of '6', indicating the 
likelihood of negligible (0% to 10%) recovery. (For the complete recovery 
analysis, see Standard & Poor's recovery report on rate National CineMedia, 
published May 2, 2012, on RatingsDirect.)

The stable rating outlook reflects our expectation that NCM Inc. will continue 
generating good cash flow from operations and maintain leverage in the high-3x 
to 4x area over the next year. We also believe it will maintain an adequate 
margin of compliance with covenants. 

We could lower our rating if adjusted debt to EBITDA rises above 4.5x because 
of a more aggressive policy that increases debt through a debt-financed 
acquisition or higher dividends. A downgrade would be especially likely if 
further EBITDA declines or a narrowing of liquidity are accompanied by more 
aggressive financial policies such as a high single-digit percentage rate 
revenue decline and a high-teens percent EBITDA decline that are not offset by 
reductions in dividend distributions to founding members and NCM Inc. could 
raise leverage, resulting in a downgrade.

Although unlikely over the intermediate term, we could raise our rating if 
there is a deliberate move by management and shareholders to improve and 
maintain higher liquidity, especially at NCM LLC, by reducing the amount of 
cash flow distributed to shareholders and the founding members.

Related Criteria And Research
     -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 
     -- Liquidity Descriptors for Global Corporate Issuers, Sept. 28, 2011 
     -- Standard & Poor's Revises Its Approach To Rating Speculative-Grade 
Credits, May 13, 2008 
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008

Chris Valentine's temporary telephone number is (646-300-4670)
Ratings List

Ratings Affirmed

National CineMedia LLC
National CineMedia Inc.
 Corporate Credit Rating                BB-/Stable/--      

National CineMedia LLC
 Senior Secured                         BB-                
   Recovery Rating                      3                  
 Senior Unsecured                       B                  
   Recovery Rating                      6                  

New Rating

National CineMedia LLC
 Senior Secured
  US$265 mil term B bank ln due 2019    BB-                
   Recovery Rating                      3                  
  US$110 mil revolver bank ln due 2017  BB-                
   Recovery Rating                      3                  

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at Use the Ratings search box located in the left 

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