AMC Networks downgraded to B3 by Moody's as challenges persist

Moody's downgraded AMC Networks' corporate family rating to B3 from B2, citing ongoing operational challenges from declining linear subscriber trends and limited visibility on performance stabilization. The downgrade reflects expectations for continued revenue declines, with domestic distribution fees and advertising sales projected to fall, despite significant investment in content creation. While Moody's projects solid free cash flow and expects AMC Networks to reduce leverage, the outlook remains stable, contingent on maintaining liquidity and approaching a total debt-EBITDA ratio of 5.0x by year-end 2026.

Analysis

Moody's has downgraded AMC Networks' Corporate Family Rating to B3 from B2, reflecting persistent operational challenges as the company grapples with declining linear subscriber trends that are eroding its revenue and profitability, coupled with limited visibility on performance stabilization. The downgrade also affected AMC Networks’ probability of default rating (to B3-PD), senior secured bank credit facilities (to B2 from Ba3), senior secured notes (to B2 from Ba3), and senior unsecured notes (to Caa2 from Caa1), with the two-notch downgrade to senior secured ratings partly due to changes in the capital structure mix. Moody's projects continued financial pressure, anticipating domestic distribution fees to decline by mid-single digits and advertising sales by low double digits, leading to expected total revenue declines of nearly 6% in 2025 and 4% in 2026, subsequent to a 10.7% decline in 2024. This outlook persists despite AMC Networks investing approximately $1 billion annually in content. The company is undertaking a refinancing, including a proposed $400 million senior secured notes offering due 2032 (rated B2 by Moody's), to address upcoming maturities, with Moody's forecasting total debt-to-EBITDA at 5.5x and net debt-to-EBITDA at 3.6x for year-end 2025. Positively, Moody's expects solid free cash flow of around $250 million per year in 2025 and 2026, a strong commitment to reduce leverage, and maintained very good liquidity, evidenced by approximately $870 million in cash as of March 31, 2025, and full availability under a new $175 million revolving credit facility. The stable outlook hinges on AMC Networks sustaining this liquidity, generating significant free cash flow, and progressing towards a total debt-EBITDA ratio of 5.0x by year-end 2026.

Key Decisions for Investors

• Investors should rigorously assess their exposure to AMC Networks' debt and equity given the B3 corporate family rating, which signals significant credit risk amid ongoing operational headwinds from secular declines in the linear television business, and note that external AI-driven valuation tools have not identified the stock as a top undervalued opportunity.
• Careful monitoring of the company's ability to stabilize revenue and EBITDA through its substantial content investments and direct-to-consumer strategy is essential, as projected declines in distribution fees and advertising sales will challenge deleveraging efforts, despite anticipated annual free cash flow of approximately $250 million.
• Closely track AMC Networks' progress towards its year-end 2026 total debt-to-EBITDA target of 5.0x and its management of upcoming debt maturities, as achieving these financial milestones is critical for maintaining the stable outlook and mitigating further credit deterioration.