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"The point I raise is the Fitch score associated with the DEBT, which has a maturity of 2023, is something corporate investors need to concern themselves with not private investors."
That is the most ridiculous post I have ever read. You are invested in the company which is exposed to the debt, nobody mentioned trading debt but the debt is on the books of the company you own.
If the covenants are breached can you explain to me HOW they will service this debt?
Do you understand what a debt for equity swap is and how that is extremely detrimental to the private investor for which you claim they have no concern?
Makes me laugh when people post negative things and try to back it up by explaining to the rest how the corporate world acts when they can't even read past rns's themselves lol
@Dreammachine- no point trying to act like you know how business's run when you don't even know that the bod have already done this and made the decision to secure finance in case they have to remain closed until the end of the year. just read the following
"The Group has also agreed the terms of $110m of additional liquidity through an increase in its revolving credit facility. In addition, the Company has secured credit committee approval to apply for an additional $45m through the CLBILS loan scheme in the UK and expects shortly to commence a process to access $25m through the US government CARES Act. Cineworld expects that this additional liquidity, to the extent required, will provide it with sufficient headroom to support the Group even in the unlikely event cinemas remain closed until the end of the year."
The point I raise is the Fitch score associated with the DEBT, which has a maturity of 2023, is something corporate investors need to concern themselves with not private investors.
The BoD have already mitigated the immediete liquidity position citing that they have sufficent funds to keep all of their cinemas closed through the entire year. We know that this isn't required as most territories are open, with the exception of the US, granted they make-up 73% of their estate. This remains on track for 21 August so 2 weeks away.
If I was to humour your post about debt securities, again something that isn't relevant as PIs are not trading it, the default risk of Grade B debt (which Rolls Royce has as well) is 4-6%.
Let's try to stay on-topic, shall we?
RS2002 - who said anything about CINE going bankrupt?
What I said was if the covenants fail testing (having already been risen by circa 40%) then either debtors will need to raise again (unlikely) or they will want capital reduction.
How do you propose debt will be paid down? Debt for equity and share holders in such circumstances will take an almighty haircut.
That is what is likely to happen here if as I said the run up to December outlook does not improve (and IMHO it is unlikely to)
Cineworld’s probability of bankruptcy is based on Altman Z-Score and Piotroski F-Score is 7%.
Source: https://www.macroaxis.com/invest/ratio/CINE.L/Probability-Of-Bankruptcy
The risk of default of B grade DEBT = 4-10%
- Negative outlook ~10%
- Positive outlook ~90%
Whilst the grade of their DEBT is B, unless you’re a capital fund which has a desire to trade DEBT SECURITY which is a type of financial asset that is created when one party lends money to another. For example, corporate bonds issued by corporations and sold to investors. CORPORATE bond investors lend money to corporations in return for a pre-established number of interest payments along with the return of their principal upon the bond's maturity date.
Cineworld’s maturity for its DEBT is 2023, but keep in mind when purchasing stock, you are trading EQUITIES SECURITY.
Thus to bring up their score and options on DEBT trading is a MOOT POINT.
In short, unless you’re trading debt securities, the B grade is not relative to the performance of the company merely demonstrates the 4-6% risk of default for those who are doing debt securities trading such as institutions.
Cineworld share investors are buying into is a EQUITY SECURITY and are assessing the value of the stock on its ability to operate and perform post coronavirus.
Try harder, Tidd.
Sizeable Spike In Leverage: As a result of the cash burn in 2020 and the gradual return to normality envisaged in our base case, we see Cineworld's funds from operations (FFO) gross leverage rising to about 10.0x at end-2021 from 5.0x at end-2019. The figure is unlikely to be meaningful in 2020 due to low EBITDA generation. The gradual return to normality by 4Q21 should enable Cineworld to reduce leverage down to 5.0x by end-2022. A second pandemic wave and further lockdowns would be the main downside risk to our base case.
Covenant Breach Likely: Cineworld's 2019 results indicate that the company had US dollar and euro term loans totalling USD3.6 billion and a RCF of USD462.5 million. The RCF is subject to net debt-to-EBITDA covenants, which are triggered at above 35% utilisation, and the term loans also have cross default provisions in respect of the covenant. However, our base case forecasts that the leverage covenant increase to 9.0x for the December 2020 testing may not be sufficient and may require further flexibility from Cineworld's lenders. This flexibility may also be required in 2021 depending on the level of cinema attendance.