S&P upgrades American Achievement

Standard & Poor's said it raised its corporate credit rating on American Achievement Corp. B- from SD (selective default) and the issue-level ratings on its debt and removed all ratings from CreditWatch.

Following the changes, the company's senior secured credit facility is rated B+ with a recovery rating of 1, its senior subordinated notes are rated B- with a recovery rating of 3 and American Achievement Group Holding Corp.'s senior PIK notes and AAC Group Holding Corp.'s senior discount notes are rated CCC with a recovery rating of 6.

The outlook is stable.

The upgrade follows the conclusion of S&P's review of the company's capital structure subsequent to the most recent subpar repurchase of $65 million face value of the 12¾% senior PIK notes, which the agency viewed the purchase as being tantamount to default.

S&P believes the recent notes repurchase will result in free cash flow generation modestly in excess of accreting debt balances over the intermediate term, improving the company's ability to sustain its capital structure.

However, the agency said the B- corporate credit rating reflects the company's high debt leverage and S&P's concern about large debt maturities in 2012.

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