Approximately $2.2 billion of rated debt affected
New York, February 04, 2011 -- Moody's Investors Service has assigned a Ba3 rating to the proposed $250
million senior secured credit facility add-on of Affinion Group
Holdings, Inc. In addition, Moody's has lowered
the company's existing senior secured credit facilities rating to
Ba3 from Ba2, reflecting the incremental increase in senior debt
and lower collateral coverage in a distress scenario. Proceeds
from the issuance are expected to be used to pay a $134.5
million special dividend and the remaining funds to be used at a later
date for either debt repayment, the redemption of the remaining
preferred stock at holdings, acquisitions and general corporate
purposes. These ratings have been assigned subject to Moody's review
of final documentation following completion of the offering. Moody's
has also affirmed the B2 corporate family and probability of default rating
and, the SGL-2 speculative grade liquidity rating.
The rating outlook is stable.
The following instrument ratings and LGD assessments have been affected:
Affinion Group, Inc.
Rating assigned:
$250 million senior secured credit facility due 2016 at Ba3 (LGD2,
23%);
Ratings Lowered:
$165 million senior secured revolver to Ba3 (LGD2, 23%)
from Ba2 (LGD2, 20%);
$875 million senior secured term loan B to Ba3 (to LGD2,
23%) from Ba2 (LGD2, 20%);
Ratings Affirmed:
Corporate Family Rating at B2;
Probability of Default Rating at B2;
$475 million senior notes due 2018 at B3 (LGD4, 66%
from LGD4, 60%)
$356 million senior subordinated notes due 2015 at Caa1 (LGD5,
84% from LGD5, 81%);
Speculative Grade Liquidity Rating at SGL-2;
Affinion Group Holdings, Inc. (Affinion)
$325M senior unsecured notes due 2015, Caa1 (LGD6,
93%);
RATINGS RATIONALE
The B2 Corporate Family Rating reflects weak financial strength metrics
for the rating category, lower member counts in the North American
membership and supplemental insured product lines, and the risk
that a difficult economic environment could continue to pressure consumer
response rates to the company's product offerings. The ratings
are supported by the company's large member base, direct marketing
expertise, track record of steady financial performance and growth
opportunities in international markets.
The stable outlook incorporates expectations that Affinion will continue
to generate positive free cash flow and that credit metrics will improve
through EBITDA growth. The stable outlook also assumes Affinion
will maintain adequate or better liquidity.
The rating outlook could be changed to positive if a sustained improvement
in profitability and debt reduction results in debt to EBITDA of less
than 5 times and free cash flow to debt of about 8%.
The ratings could be pressured by a material decline in profitability
resulting from (i) the loss of a top affinity partner, (ii) a sharp
decline in the member base, or (iii) the failure to achieve growth
in average revenue per member. Any additional debt-financed
dividends or recapitalization could also pressure the ratings.
The ratings could be downgraded if Debt to EBITDA and free cash flow to
debt are sustained at over 6.5 times and below 2%,
respectively.
The principal methodologies used in rating 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 June 2009.
Affinion is a leading provider of marketing services and loyalty programs
to many of the largest financial service companies globally. The
company provides credit monitoring and identity-theft resolution,
accidental death and dismemberment insurance, discount travel services,
loyalty programs, various checking account and credit card enhancement
services. Affinion is 70% owned by private equity sponsor
Apollo Management V, L.P.'s. For the twelve
months ended September 30, 2010, the company reported revenue
of approximately $1.4 billion.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
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
for further information.
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.
New York
Ron Neysmith
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Ba3 rating to Affinion's proposed $250 million Sr. Sec. Credit Facilities add-on; B2 CFR affirmed
