European movie theater company Vue International Bidco PLC was lowered today by Moody's to Caa2 with a negative outlook, from B3, on concerns over a "meaningful delay" in the recovery of global theater attendance because of a delay in new film releases. The company's senior secured term loan B1 due 2026 and its secured revolving credit facility due 2025 were both lowered as well, to Caa1 from B2.

Moody's says it took the ratings action because of the negative impact to attendance from the announced postponement of blockbuster movie releases, specifically citing the recently delayed release of the new James Bond film, "No Time to Die" to April 2021, from November 2020. The rating agency also mentioned the films "Fast & Furious 9," "Black Widow," "The Eternals" and "Jurassic World: Dominion" as having been delayed into 2021.

Moody's currently projects Vue's revenues to decline by more than 50% in fiscal year 2020, with a resultant "minimal" EBITDA for the year. The agency expects a "gradual recovery in 2021," though it notes that Vue's high leverage and structural challenges facing the cinema industry "could continue to pose meaningful challenges for VUE once the impact of coronavirus is phased off." The agency added that the slower-than-expected recovery now raises the risk of a debt restructuring.

While Moody's anticipates Vue's liquidity will weaken through March 2021, the rating agency believes the company has sufficient liquidity to last through that period without an improvement in attendance, but "thereafter, VUE would need to explore additional funding options."

In September, S&P Global Ratings downgraded Vue and its debt to CCC+ from B-, with a negative outlook. The agency predicted leverage will remain very high until the end of the financial year ending Nov. 30, 2021, at more than 9x excluding shareholder instruments, while the company's free cash flow generation was projected to also remain weak.

Vue's lenders recently agreed to waive the net leverage covenant test on the £65 million-equivalent multicurrency revolving credit facility for the next four testing dates until Aug. 31, 2021. Instead, Vue will need to comply with a minimum liquidity test. The firm has no maturities until 2025 when the RCF is due.