NCMI - National Cinemedia cut by Benchmark over 'challenging' movie attendance ad recovery

In-theater advertising company National CineMedia ( NASDAQ: NCMI ) was downgraded by investment firm Benchmark on Monday, citing a "challenging" movie theater attendance profile and advertising recovery, as well as the company's heavy debt load.

Analyst Mike Hickey lowered his rating on National CineMedia ( NCMI ) shares to hold from buy, noting that the uncertainty as it relates to Regal's bankruptcy process and how long its exclusive agreement with the number 2 U.S. movie theater chain lasts is also a part of the downgrade.

"We are confident National CineMedia will be able to amend and extend its existing near-term  debt and leverage covenants, but market conditions are challenging and could influence fewer desirable outcomes," Hickey wrote in a note to clients.

The analyst added that it's likely the Regal contract stays with  National CineMedia ( NCMI ), but there is the possibility it is canceled, which would be a "devastating blow" to National CineMedia ( NCMI ) if it happens.

The owner of Regal, Cineworld ( OTCPK:CNWGQ ), CNNWQ, filed for bankruptcy last month.

Hickey also pointed out that even though the box office continues to recover, a possible recession may hurt theater attendance and with National CineMedia ( NCMI ) carrying a debt load that is rated CCC, outlook negative, by S&P, a payment default or subpar restructuring is "looking increasingly likely," perhaps as soon as the middle of next year.

Last month, a lender group of National CineMedia ( NCMI ) hired Centerview Partners to explore options amid an environment of movie-theater uncertainty and some approaching debt maturities .

For further details see: