Cinemark Credit Rating Downgraded Over Extended Cinema Closures

Cinemark is proceeding to convert its domestic theater circuits to the delivery network developed by cinema tech startup MetaMedia.

Fitch Ratings said Cinemark screens will likely remain dark until June "at the earliest."

Fitch Ratings has downgraded the credit rating for exhibition giant Cinemark Holdings over concerns that current theater closures amid the coronavirus pandemic will last until June "at the earliest."

"Additionally, Fitch remains concerned over the company's ability to quickly return to a normalized course of operations due to either changes in consumer behavior or additional public health mandates that limit theater attendance capacity," the ratings agency said Thursday in a ratings note.

Cinemark, the third-largest domestic cinema chain, on March 16 first announced temporary theater closures at all of its 345 sites amid the COVID-19 crisis. That was followed by rival cinemas across the U.S. also going dark as a health safety precaution.

Fitch on Thursday reduced Cinemark's credit rating by one notch to B+, with a negative outlook. The agency's analysts argued "Cinemark benefits from strong available liquidity that will provide a cushion to support run-rate operating losses until the crisis abates."

But theater closures that could last until mid-summer "will materially impact Cinemark's financial performance" due to the unknown length and severity of the coronavirus outbreak and likely changes to consumer cinema-going habits and preferences.

Fitch pointed to Cinemark having $488.3 million in cash on its balance sheet as of December 2019, and the company having drawn $98.8 million of availability under its revolving credit line on March 25 of this year.

"Fitch believes this provides adequate runway to fund the company's operations through the end of fiscal 2020," the ratings agency added, even as it monitors the company's liquidity position should the public health crisis extend into the summer months.

That vote of confidence in Cinemark contrasts with Wall Street analysts seeing a possible Chapter 11 bankruptcy filing from rival cinema giant AMC Theatres as the coronavirus pandemic takes its toll on the exhibition sector.