Moody's Investor Service assigned a B1 rating to Carmike Cinemas, Inc.'s (Carmike) proposed $230 million second lien notes and a Ba2 rating to the proposed $50 million secured revolving credit facility. The new notes refinance Carmike's existing $210 million second lien notes due 2019, with the difference covering call premiums, fees and expenses related to retiring those notes. The current $25 million secured credit facility due 2016 will be replaced with a new $50 million secured credit facility due 2020. With the transaction not altering Carmike's risk profile, the company's B2 corporate family rating (CFR), B2-PD probability of default rating and stable outlook remain unchanged. 

A summary of today's actions follows:

Assignments:

..Issuer: Carmike Cinemas, Inc.

....Senior Secured 1st Lien Rev Credit Facility (Local Currency), Assigned Ba2, LGD1

....Senior Secured Second Lien Notes (Local Currency), Assigned B1, LGD3

RATINGS RATIONALE 

High leverage (almost 6 times debt-to-EBITDA per Moody's standard adjustments including the capitalization of operating leases at an 8 times multiple) affords minimal flexibility to manage the inherent volatility of operating in an industry reliant on movie studios to drive the attendance that leads to cash flow from admissions and concessions. Carmike's B2 Corporate Family Rating incorporates this risk, and the current leverage, up from the low 5 times range last year (all metrics pro forma for acquisitions) demonstrates the impact of the swings in attendance. Very good liquidity helps mitigate the risks related to attendance volatility and the expansion strategy. We expect metrics to improve in 2015 based on better attendance trends and more time to integrate theaters acquired.

Lack of scale and the below peer group EBITDA margins also constrain the rating. However, we attribute the lower EBITDA margin partially to the small to mid-size markets Carmike targets, which have less competition from both other theater operators and alternative entertainment options. Also, despite some year to year variability related to film popularity and low-to-negative attendance growth prospects, we consider the theater industry to be relatively stable over at least the next five years, with typically only modest impact from economic conditions.

The principal methodology used in these ratings was Business and Consumer Service Industry published in December 2014. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.