FitchRatings has cut itsoutlookon Cineplexs debt rating tonegative,fromstable, citing a lack of size hampering the Canadian exhibition giant as it recovers from pandemic-era industry disruptions.

Fitch did affirm the Canadian exhibition giants long term creditworthiness at B, but downgraded the debt rating on a CAD$100 million senior secured revolving credit facility and CAD$575 million senior secured notes to BB.

The negative outlook reflects concerns about achieving margin gains post-2024 film supply disruption, maintaining attendance levels amid rising streaming competition, especially for smaller-format movies, and adapting to a more streamlined film release schedule, the ratings agency said in its commentary. Fitch said Cineplexs long term debt rating was supported by a 73 percent share of the Canadian box office and diverse revenue streams like its out-of-home family entertainment centers and digital media businesses. Still, Hollywood box office remains Cineplexs main source of revenues.

And the outlook downgrade reflected Cineplexs smaller scale, historically lower adjusted EBITDA margins and weaker free cash flow compared to U.S. peers, Fitch argued. During the companys most recently fourth quarter, Cineplex continued to post gains from Hollywoods box office rebound out of the pandemic with a swing to a profit of CAN$3.3 million, or 5 cents per-share, compared to a loss of CAN$9 million, or 14 cents per-share, in the year-earlier period.

But Fitch argued Cineplex along with its industry peers has yet to consistently return to pre-pandemic cinema attendance levels in 2019, and, with the prospect of future industry disruptions, gains from higher ticket prices and concessions per patron can be offset by higher operating costs.

According to Fitch, Cineplex had $791.3 million in total debt as of Dec. 31, 2024, comprising $575 million senior secured notes and $216.3 million of unsecured convertible notes.