Moody's rates Affinity Group notes B3

Moody's Investors Service said it assigned a B3 rating to Affinity Group Inc.'s proposed $190 million of senior subordinated notes due 2012 and lowered the company's senior implied rating to B1 from Ba3 and bank credit facilities ratings to Ba3 from Ba2.

The proceeds of the note offering will be used to redeem the senior unsecured notes at Affinity's parent holding company, make current and future distributions to the company's major shareholder, and repay a portion of the term loan B.

Moody's said the downgrade reflects the additional financial risk associated with the releveraging of the balance sheet to make shareholder distributions. As noted in Moody's April 2003 news release, the company was weakly positioned in the rating category due to its high lease-adjusted debt leverage.

This was mitigated by the expectation that the company would grow into its balance sheet during second half of 2003 and first half of 2004. Moody's said this is no longer the case, because the company is presently releveraging, and an additional $15 million of expected future distributions are likely to keep leverage at these new higher levels for the foreseeable future.

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