Affinion extends consent time in exchange offers for two note series

By Susanna Moon

Chicago, Oct. 14 – Affinion Group Holdings, Inc. said it extended the consent time in the exchange offers for its $260,465,421 of 13¾%/14½% senior secured PIK toggle notes due 2018 and the $359,955,720 of 13½% senior subordinated notes due 2018 issued by Affinion Investments, LLC.

The consent deadline is now 11:59 p.m. ET on Oct. 14, extended from 11:59 p.m. ET on Oct. 13. The exchange ends at 11:59 p.m. ET on Oct. 27.

As the company said on Sept. 30, it is offering to exchange the notes for common stock.

As of 11:59 p.m. ET on Oct. 13, investors had tendered $231,075,161 principal amount, or 88.7%, of Affinion Holdings' 13¾%/14½% PIK notes and $335,859,820 principal amount, or 93.3%, of Affinion Investments’ 13½% notes, according to a company notice.

Affinion Holdings and Affinion International Holdings Ltd. previously also announced a rights offering for holders of the two series of notes in which they will be able to purchase a total of $110 million of 7½% cash/PIK senior notes due 2018 of Affinion International and 2,483,333 shares of common stock for a total of $110 million in cash.

Affinion said that it hopes to cut its debt by $600 million and its annual cash interest payments by $50 million through the exchange offers.

Along with the cash raised from the rights offering, the exchange will also “provide additional flexibility for the company to execute its strategic initiatives and grow its business,” according to a previous release.

Under the exchange, the 13¾%/14½% notes will be exchanged for 7.15066 shares if tendered before the consent deadline or 6.15066 if tendered after.

The 13½% notes will be exchanged for 15.52274 shares if tendered before the consent deadline or 14.52274 if tendered after.

No payment will be made for accrued interest.

Affinion said that on Tuesday holders of 86% of each series of the existing notes entered into support agreements. The holders include funds managed by Allianz Global Investors U.S. LLC, funds and accounts managed by Ares Management LLC and affiliates, funds and accounts managed by Empyrean Capital Partners, LP, funds managed by PennantPark Investment Advisers, LLC and Third Avenue Trust, on behalf of Third Avenue Focused Credit Fund.

Under the support agreements, the funds have agreed to tender their notes into the exchange.

One of the holders that signed the support agreement will also backstop the rights offering by agreeing to buy any new notes and stock that are not purchased by other holders.

In the consent solicitation that is running concurrently with the exchange, Affinion is asking holders of the 13¾%/14½% notes to agree to remove substantially all of the restrictive covenants and certain of the default provisions and to release the collateral securing the notes and holders of the 13½% notes to agree to remove substantially all of the restrictive covenants and certain of the default provisions.

Holders who tender into the exchange must deliver consents.

To make the amendments, Affinion needs consents from holders of a majority of the notes or, to release the collateral, two-thirds of the notes.

The exchange is conditional upon the necessary consents being given.

It is also conditional on holders tendering at least 95% of each series of the notes and completion of the rights offering.

In the rights offering, Affinion is offering units of the new notes and 22.57576 shares at a price of $1,000 per unit. Out of the total, 25% of the rights will be allocated to holders of the 13¾%/14½% notes and 75% to holders of the 13½% notes.

Holders who are limited as to the amount of stock they can hold for regulatory reasons will receive penny warrants to the extent necessary.

After completion of the exchange offers, consent solicitations and rights offering, Affinion will convert its existing class A stock into class C stock that will on conversion represent 5% of the outstanding common stock, and class D stock that on conversion will represent 5% of the common stock.

To convert the class C and D stock, holders must submit an exercise notice and the conversion price of $65.80 for the class C stock and $85.80 for the class D stock. The initial conversion ratio is one share of new common stock per share of class C or class D stock.

Existing series A warrants and class B common stock will be eliminated.

The information and exchange agent is Prime Clerk LLC (855 650-7243 or 917 877-5364).

The transactions are only open to qualified institutional buyers, accredited investors and holders outside the United States.

Affinion is a Stamford, Conn., provider of marketing loyalty products.

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