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Global Credit Research - 05 Nov 2010
Approximately $325 million of debt rated
New York, November 05, 2010 -- Moody's Investor Service assigned a B3 Corporate Family Rating (CFR)
and a B3 Probability of Default Rating (PDR) to Affinity Group Inc.
("Affinity Group") and will withdraw Caa2 CFR and Caa3 PDR
for its parent company, Affinity Group Holding, Inc.
Moody's also assigned a B3, LGD4, 50% rating
to Affinity Group's new senior secured notes due 2016. Net proceeds
from the new notes will be used to refinance existing debt issued by Affinity
Group. Parent company senior notes due 2012 and issued by Affinity
Group Holding, Inc will be extinguished simultaneously with the
closing of the new notes and there will be no debt at the parent level.
The ratings outlook is stable.
The following ratings were assigned:
.. Issuer: Affinity Group, Inc.
. Corporate Family Rating: B3
. Probability of Default Rating: B3
. Speculative Grade Liquidity Rating, SGL-
New senior secured notes due 2016 -- B3,
The following ratings will be withdrawn:
.. Issuer: Affinity Group Holding, Inc.
. Corporate Family Rating, Withdrawn, previously
. Probability of Default Rating, Withdrawn,
. Speculative Grade Liquidity Rating, Withdrawn,
10.875% senior notes due 2012 -- Withdrawn,
previously Ca, LGD5, 74%
.. Issuer: Affinity Group, Inc.
... 9.0% senior subordinated
notes due 2012 -- Withdrawn, previously Caa2, LGD3,
... Senior secured term loan due 2015 --
Withdrawn, previously B1, LGD1, 7%
The rating outlook is stable
In the event the proposed transaction is not successfully executed,
ratings for Affinity Group Holding, Inc. and Affinity Group,
Inc. will revert to those in existence prior to the new assignments.
Specifically, Affinity Group Holding, Inc. will revert
to a CFR of Caa2 and a PDR of Caa3 with appropriate instrument ratings
for each issuer as noted above.
Affinity Group's B3 corporate family rating (CFR) reflects the company's
high leverage, modest free cash flow, and concentration in
the recreational vehicle ("RV") industry. After the proposed extinguishment
of $88 million of senior notes due 2012 at the parent holding company
level, debt-to EBITDA leverage ratios remain high at 5.4x
(including Moody's standard adjustments) and free cash flow is expected
to be modest over the next 12 months. Although there is no requirement,
Affinity Group has the ability to apply excess cash balances to prepay
notes as permitted by optional redemption provisions allowing up to 10%
or $32.5 million of annual prepayments at a premium.
Ratings are supported by the stability of the company's RV-focused
membership and services businesses, including emergency roadside
services and extended warranties, in combination with favorable
aging demographic trends expected to enhance the pool of potential RV
enthusiasts. Each of Affinity Group's business segments are aimed
at increasing exposure to RV enthusiasts with membership services products
(60% of total EBITDA) generating most of the operating profits
followed by more cyclical segments, retail (27% of EBITDA)
and media (13% of EBITDA).
The stable outlook reflects our expectation for steady performance of
Affinity Group's RV membership and related services business and for modest
increases in shipments of RV units over the rating horizon enhancing demand
for the company's affiliation services and retail products.
The outlook also reflects our expectation that free cash flow will be
applied to reduce debt balances as permitted by prepayment provisions
or to enhance liquidity. Ratings could face downward pressure if
debt-to-EBITDA leverage ratios were to exceed 6.0x
as a result of deterioration in renewal rates, declining membership
levels, or lower EBITDA margins. Ratings could also be pressured
if liquidity becomes strained or performance at Camping World, Inc.,
a subsidiary of the company, were to deteriorate to the extent that
there would be only modest cushion to minimum EBITDA covenants under its
revolver. Ratings would be considered for an upgrade if stronger
than expected membership revenues or overall sales results in debt-to-EBITDA
leverage ratios being sustained below 4.5x and free cash flow-to
debt ratios being greater than 5%.
The last rating action occurred on April 23, 2010 when Moody's
assigned a B1 rating to Affinity Group's secured term loan due 2015 and
confirmed the Caa2 corporate family rating for Affinity Group's parent,
Affinity Group Holding, Inc.
The principal methodologies used in rating Affinity Group were Global
Business & Consumer Service Industry published in October 2010,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
Affinity Group, Inc. is a leading direct marketer,
specialty retailer and publisher targeting North American recreational
vehicle owners and outdoor enthusiasts. The company operates three
business segments: Membership Services, a leading member-based
direct marketing organization with over 1.7 million club members
and 8.8 million consumers in its proprietary database; Retail,
consisting of its Camping World segment, a nationwide retailer offering
a complete selection of RV products and services; Media, including
publications and consumer events which create awareness in the RV community.
The company reported net revenue of approximately $476 million
for the twelve months ended September 30, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
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Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Assigns B3 Corporate Family Rating to Affinity Group, Inc. and to New Sr Sec Notes
250 Greenwich Street
New York, NY 10007
No Related Data.
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