EFTA01385427.pdf

3 January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite a compelling one for consumers, especially given increased competition for audience's attention and today's average ticket prices north of $8.40. After an active slate of M&A in 2016 compliments of AMC (it acquired the #4 US exhibitor Carmike Cinemas. UK-based Odeon & UCI Cinemas, and Stockholm-based Nordic Cinema Group), 2017 was a bit quiet until just recently. On December 5th, UK-based Cineworld announced plans to acquire Regal for -$3.6bn cash. We calculate that this represents a healthy -9x seller multiple of 2018 EBITDA (-7.3x post-synergies). Looking to 2018, with Regal off the market and AMC digesting its 3 acquisitions, it may be up to Cinemark to drive further material consolidation. Noise around the theatrical window quieted down for a while, but heated up at times during 2017. Some studios are reportedly pushing for a premium video- on-demand offering that could shrink the theatrical window in some cases to just 2 weeks (versus today's typical 90-day window). The offerings would be priced at a significant premium relative to current on-demand options Based on recent commentary, it doesn't appear that any consensus has been reached amongst the studios, let alone between the studios and the theater groups, on the amount of time after theatrical release, pricing, and revenue shares/incentives, among others. We ultimately see any move to tighten windows being a mutually agreed upon decision between theater owners and studios, but it may take some time to get there. So with 2017 almost in the books, we look ahead with an optimistic eye to what 2018 has in store. In our view, all roads for the sector lead back to the release slate. We have earmarked select upcoming movies in the following chart. Highlights of tlx: Upcoming Movie Release Slate 1019 2018 In AAer M Last Key pne• Lap 'Mimi. Lan••14 Nat MAst leo.° rn. Crynalef it Ow Wawa two fawn° Ss*, wooer. 21.4y Ownwisow &want Owiwit "nano. 2 (MIA Own twine'', 'Or tOwl-• Firm PareA Dwain! Man Owe TM Dean ConIto.) 'WM gar Aeono. Onn tow Pun "new fay Saran fire IDMat• Stele, .M Doman) A.Per. Its' We iltatat ()way Jr Ow mimixewh A...AMY* trna• Monstsga Meade Ct.:earn) I* a In Pafyiefrbse Ifrearft. Cafe, ACOS4t OW SW.* (Om) Ovaliccd (kW 00,9010awd 0 Fetroa Aniwn Swine( Chirkii Moro"? a -win &Wee Cats film...Ma Mrs "Who wy Annie, A Ann** e rn• aNsnry tiw mtsciblin 2 (Ceng Masc. Noe "nen Senna J•cMO, 1 roe*Pals 014nle Bran .nnc awn Felon lAinen Snow SOO 1 nx4 r,MnMM S s• mew( vacakva 4pnm JaNY, Sµnr ell Mean', lb now Wo Go Apo,' iMema, AMP BOM Onwv Wei*. aipowti 6 'Tem Gwen Mem Wane'In *dee) "iir f Were 1 (Den* Ve'n'n a. Anon "own xmn NA Peens "Ow /rye A *dm PennFenn,I?Ow Own a Saw' Me Gess. lernrciel Conon*, K.1141•81,741 .AmeA Iterpow. Moro Mem lot lent, Hann a Witmer lire fern* Min C IWO 'Mall< Boosts TM Cnnes e/Orivenesi" if Reenene Ad,Lai Cnewitwepi tRobleelaiown Menif 9092 Retie Ant Me Hest Peon WoeIrwin Eingent Wen Fos) Aorta linen Maycal Ses0 Fool Ommeient Wow &cal Mary P I Ream ask M. LINAlesel AMASI / , 1140 Sc.,'. 90% 0.114 We think the 2018 slate looks loaded and has the potential to push the industry to a record-setting year. First quarter has a high bar to overcome versus a strong 1Q17, but after that the comps get easier. Generally speaking, the theater exhibitors' securities are trading at levels that reflect the overall stability of the past few years, as well as, generally modest leverage, reasonable liquidity, and a healthy film slate. AMC bonds specifically hit some choppy waters as their acquisition spree pushed leverage higher just a soft box office stretch rolled through, but we think management now has a better handle on the business. The rising tide of the aforementioned robust film slate for 2018 should lift all ships regardless of ups & downs in the economy (the sector has historically been recession-resistant); all in, we're overweight the theater exhibitors to kick off 2017. Page 152 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086711 CONFIDENTIAL SDNY_GM_00232895 EFTA01385427