Fitch Rates Regal's $400MM Senior Unsecured Notes 'B+/RR4'

NEW YORK--(Business Wire)--
Fitch Ratings has assigned a 'B+/RR4' rating to Regal Cinemas Corp.'s (Regal
Cinemas; indirect wholly owned subsidiary of Regal Entertainment Group [RGC])
$400 million 8.625% senior unsecured notes. These notes are expected to rank
senior to Regal Cinemas' existing 9.375% senior subordinated notes and junior to
the secured bank facility. In addition, the $400 million in notes are
structurally senior to RGC's 6.25% convertible notes. Proceeds of the notes are
expected to be used to repay borrowings under the Regal Cinemas' bank term loan
due 2013.

Fitch has taken the following rating actions:

RGC

--Issuer Default Rating (IDR) affirmed at 'B+';

--Senior unsecured convertible notes affirmed at 'CCC/RR6'.

Regal Cinemas:

--IDR affirmed at 'B+';

--Senior secured facility upgraded to 'BB+/RR1' from 'BB/RR2';

--Senior unsecured notes assigned 'B+/RR4';

--Senior subordinated notes affirmed at 'B-/RR6';

The Rating Outlook is Stable.

Fitch has expected movie theaters to continue to demonstrate their hit-driven
characteristics (i.e. dependence on a strong supply of films from the studios),
and as such the solid film slate to date has driven industry attendance up
approximately 9%. While Fitch believes attendance and box office revenue is
relatively uncorrelated with the macro-economy, operating performance is
susceptible to meaningful volatility and weakness. Fitch remains concerned with
exhibitors' limited control over their core revenue stream, relatively
inflexible cost structures and high debt levels. Also, Fitch acknowledges
acquisition risk may be heightened within the movie exhibitor industry due to
National Amusements, Inc. (NAI) intentions to sell assets. Movie exhibitors
generate nominal free cashflow with which to finance acquisitions and have track
records of debt-funded consolidation activity. To the extent financing was
available, Fitch would expect any acquisition of part of NAI portfolio to be
predominantly debt financed.

Intermediate-term risks include increased competition from at-home entertainment
media, collapsing film distribution windows, increasing indirect competition
from other distribution channels (such as DVD, video on demand or the Internet),
and RGC's history of aggressive common and special dividend payouts. (Fitch
notes the company did cut its common dividend 40% earlier in 2009.)

As of March 31, 2009, RGC's concession revenues have remained stable despite the
weak economic conditions. Fitch remains cautious that high margin concessions
(85% gross margin; 26% of RGC's total revenues), may be vulnerable to reduced
per-guest concession spending due to cyclical factors or a re-acceleration of
commodity prices.

The ratings continue to reflect RGC's size and position as the largest domestic
movie exhibitor, with 6,773 screens in 549 theaters. RGC's portfolio has
higher-than average screens per location (approximately 12) and Fitch expects
the company to continue to improve its relatively modern theater circuit in a
disciplined manner. The ratings also reflect solid geographic diversity and
sound operating performance.

As of March 31, 2009, liquidity is made up of $187 million in cash and $92.3
million in credit facility availability (reduced by $2.7 million in letters of
credit and $5 million exposure to Lehman), under its $100 million credit
facility, which matures in October 2011. Total debt as of March 31, 2009 was $2
billion and lease adjusted leverage, based on Fitch's calculations, was 5.6
times (x) (unadjusted leverage was 3.9x). The company has no significant
maturity until 2011.

The January 2009 amendment provided (in addition to delaying covenant step
downs) RGC with the ability to (1) conduct a Dutch Auction and repurchase up to
$300 million in term loans by Oct. 17, 2009; and (2) when calculating the
leverage and adjusted leverage ratios (for compliance purposes only), RGC may
exclude up to $200 million in debt that is subordinated to the bank credit
agreement debt, issued for the purpose of refinancing term loan debt. The
reduction in term loan borrowings from the issuance of the $400 million note
will provide additional financial flexibility within the bank covenants to
withstand EBITDA declines.

RGC's Recovery Ratings (RR) reflect Fitch's expectation that the enterprise
value of the company, and hence, recovery rates for its creditors, will be
maximized in a restructuring scenario (going-concern), rather than a
liquidation. Fitch estimates an adjusted, distressed enterprise valuation of
$1.6 billion using a 5x multiple. The 'RR1' Recovery Rating for the company's
credit facilities reflects Fitch's belief that 91%-100% expected recovery is
reasonable. While Fitch does not assign Recovery Ratings for the company's
operating lease obligations, it is assumed that the company rejects only 30% of
its remaining $3.6 billion in operating lease commitments due to their
significance to the operations in a going-concern scenario and is liable for 15%
of those rejected values. The 'RR4' Recovery Ratings for Regal Cinemas' senior
unsecured notes (equal in ranking to the rejected operating leases) reflect an
expectation of 31%-50% recovery. The 'B-/RR6' rating for Regal Cinemas' senior
subordinated notes reflects the bonds structural seniority over RGC's
convertible notes ('CCC/RR6') and Fitch's expectation for zero recovery.

For additional information please see Fitch's full report on Regal
Entertainment, available on Fitch's web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site. The ratings above have been initiated by Fitch as
a service to investors. The issuer did not participate in the rating process
other than through the medium of its public disclosure.

Fitch Ratings, New York
Rolando Larrondo, +1-212-908-9189
Mike Simonton, CFA, +1-312-368-3138 (Chicago)
Media Relations:
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com

Copyright Business Wire 2009