Wall Street umpire Moody’s Investors Service likes what it sees when it looks at cable programmer AMC. It’s ability to contract for earnings, coupled with a focus on paying down debt, have earned it an upgraded corporate family rating.
Although Moody’s benchmarks corporate family rating and probability of default rating remain unchanged, both hovering at Ba3, AMC’s outlook has improved from Stable to Positive.
Moody’s notes that AMC paid down $250M in debt since mid-2011, and cash from its recent settlement with DISH as a result of the VOOM situation will give it an opportunity to continue to deleverage.
“We expect the company to apply a material portion of the settlement proceeds towards debt reduction, accelerating its de-leveraging trajectory relative to our initial expectations,” stated Moody’s SVP Neil Begley.
Explaining its rationale for its AMC ratings, Moody’s stated, “AMC’s Ba3 Corporate Family Rating reflects the company’s positive and reliable free cash flow generation, aided by the contractual nature of over 50% of the company’s revenue which is generated by carriage fees from pay TV providers. The rating is also impacted by AMC’s relatively high, but moderating leverage of approximately 4.85x (incorporating Moody’s standard adjustments, pro-forma for debt pay down in November 2012) at 9/30/2012.”
Moody’s also expects continued strong operating performance from the company’s core entertainment offerings, as well as a continued focus on paying down debt, both factors in the new positive rating.