S&P downgrades Affinion

S&P said it lowered the corporate credit rating on Affinion Group Holdings Inc. to SD (selective default) from CC.

The agency also said it lowered the ratings on the company's 7 7/8% senior unsecured notes due 2018, along with the 13½% senior subordinated notes due 2018 and 13¾% and 14½% senior unsecured payment-in-kind (PIK) toggle notes due 2018 to D from C.

The recovery rating on the notes remains at 6, indicating 0 to 10% expected default recovery.

The 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 downgrades follow Affinion's news that its exchanged some of its notes for a new $532.6 million senior cash 12½% payment-in-kind step-up to 15½% facility due November 2022 and warrants for 28% of fully diluted equity, S&P explained.

This is viewed as the debt exchange and tantamount to a default because the debt maturity was extended beyond the original term and the terms of the new notes would defer cash interest payments, the agency said.

S&P said it expects 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 12½% payment-in-kind step-up to 15½% notes.

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