S&PGR DWNGRDS AFFINION GROUP HOLDINGS TO ‘SD’ ON DEBT EXCHANGE
Posted on
May 11, 2017
— U.S.-based loyalty and customer engagement solutions company Affinion Group Holdings Inc. announced that it has closed an exchange transaction in which it exchanged various senior unsecured notes due 2018 for new senior cash 12.5%/payment-in-kind (PIK) step-up to 15.5% notes due November 2022 and warrants for 28% of fully diluted equity. A small amount of the existing notes will remain outstanding until July 2017, at which time the company will further increase the new notes to repay the outstanding debt.
— We view the exchange as tantamount to a default and are lowering our corporate credit rating on Affinion to ‘SD’ (selective default) from ‘CC’ and our issue-level rating on the exchanged notes to ‘D’ from ‘C’. The ‘6’ recovery rating on the notes is unchanged.
— We expect to raise the corporate credit rating over the next few days to reflect the company’s revised capital structure, which will comprise a first-lien senior secured credit facility and senior cash 12.5%/PIK step-up to 15.5% notes.
NEW YORK (S&P Global Ratings) May 10, 2017–S&P Global Ratings said today that it lowered its corporate credit rating on Affinion Group Holdings Inc. to ‘SD’ (selective default) from ‘CC’.
At the same time, we lowered our issue-level ratings on the company’s 7.875% senior unsecured notes due 2018, 13.5% senior subordinated notes due 2018, and 13.75%/14.5% senior unsecured payment-in-kind (PIK) toggle notes due 2018 to ‘D’ from ‘C’. The recovery rating on the notes remains ‘6’, indicating our expectation for negligible (0%-10%: rounded estimate: 0%) recovery of principal in the event of a default.
Our issue-level and recovery ratings on the company’s first-lien revolving credit facility and term loan, second-lien term loan, and senior secured international notes are unchanged.
“The downgrade follows Affinion’s recent announcement that it has exchanged its 7.875% senior unsecured notes due 2018, 13.5% senior subordinated notes due 2018, and 13.75%/14.5% senior unsecured PIK toggle notes due 2018 for a new $532.6 million senior cash 12.5%/PIK step-up to 15.5% facility due November 2022 and warrants for 28% of fully diluted equity,” said S&P Global Ratings credit analyst Kathryn Archibald. “We view the debt exchange as tantamount to a default because the debt maturity was extended beyond the original term and the new notes’ PIK terms would defer cash interest payments.”
We expect to raise the corporate credit rating over the next few days to reflect the company’s revised capital structure, which will comprise a first-lien senior secured credit facility and senior cash 12.5%/PIK step-up to 15.5% notes.
