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Dallas Business Journal:

Cinemark USA Inc., a subsidiary of Plano-based Cinemark Holdings Inc. (NYSE: CNK), has announced a private offering of $200 million in senior subordinated notes due in 2021, with plans to use the money to pay off $157 million in debt coming due in the next two years.

Cinemark did not return several calls seeking additional information.

Trey Branham, managing partner at the Dallas-based law offices of Goldfarb Branham LLP, said there are two reasons a company would refinance its debt in this way.

"One: It's coming due; or two: You don't like the interest rates," Branham said. "You issue this new debt to pay off old debt in order to get better terms."

Dallas Attorney Trey Branham in the Dallas Business Journal

Jeanne Shoesmith, associate director in corporate ratings at Standard & Poor's, said companies are "taking opportunities when the market turns favorable to extend maturities."

However, Cinemark would likely not get a better interest rate through this move, she said.

"Usually, bank debt is less expensive than subordinated debt, and they replaced bank debt with subordinated debt," Shoesmith said. "Their interest expense is going to go up marginally."

According to Shoesmith, the $157 million was a portion of debt that was due in 2013. Cinemark used the 2021 notes to basically extend the terms of that debt.

Even though rates will not be lower, paying off the debt in 2013 is a smart move, Shoesmith said, adding that the company has posted strong performance in the industry lately.

....

Also, as a large number of 3-D films are released this summer, Cinemark can expect to see marginal growth for the rest of the year, Shoesmith said.

"Those premium ticket sales are incremental revenue, so that should help them to grow."

http://www.bizjournals.com/dallas/print-edition/2011/06/10/cinemark-seeking-200m-to-pay-existing.html

© 2011 American City Business Journals, Inc.