Moody's lowers Affinion notes, rate loans Ba2

Moody's Investors Service said it assigned Ba2 (LGD2, 18%) ratings to Affinion Group, Inc.'s $125 million five-year senior secured revolving credit facility and $875 million six-year senior secured term loan and downgraded its $454 million senior unsecured notes due 2013 to B3 (LGD4, 60%) from B2 (LGD4, 53%).

The agency also affirmed the company's $356 million senior subordinated notes due 2015 at Caa1 (LGD5) with a revised loss-given-default rate of 82% (formerly 79%) and its $100 million senior secured revolver due 2011 and $649 million senior secured term loan due 2012 at Ba2 (LGD2, 14%).

Finally, the ratings of Affinion Group Holdings, Inc. were affirmed, including its B2 corporate family and probability-of-default ratings, SGL-1 speculative-grade liquidity rating and Caa1 (LGD6) $281 million senior unsecured term loan due 2012. The loss-given-default rate on the loan was changed to 93% from 92%.

The outlook is stable.

The proceeds from the new term loan are expected to be used to refinance the existing secured term loan facility and increase balance sheet cash.

Moody's said the downgrade of the notes reflects the increase in the proportion of the capital structure comprised of senior secured debt.

The B2 corporate family rating reflects modestly weak financial strength metrics for the rating category, declining 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 products, the agency said.

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, Moody's said.

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