S&P rates American Greetings notes B-

Standard & Poor's said it affirmed all existing ratings, including the B+ corporate credit rating, American Greetings Corp.

The outlook is stable.

S&P also said it assigned a B- rating to the company's proposed $275 million senior unsecured payment-in-kind toggle holding company notes due 2019, issued under Rule 144A with registration rights.

The recovery rating for the notes is 6, indicating 0% to 10% expected default recovery.

A parent holding company of American Greetings will issue the notes, the agency said. The notes will not be guaranteed by any of the issuer's subsidiaries and will be structurally subordinated to American Greetings' existing senior secured credit facilities and senior notes, S&P said.

The company will use net proceeds from the financing and $50 million drawn on the revolving credit facility to redeem about $247 million of nonvoting preferred stock, a $35 million investment towards building the new company headquarters, and cover fees and expenses.

The company's debt-to-EBITDA pro forma the transaction will remain essentially unchanged from adjusted debt levels as of Nov. 29, 2013, said Stephanie Harter, an S&P analyst.

The credit metrics, however, are expected to deteriorate slightly because of a construction loan to fund completion of American Greetings' new company headquarters in Ohio, Harter said in a press release.

Even with the inclusion of the construction loan, the pro forma metrics are in line with the aggressive financial risk profile indicative ratios of leverage between 4x and 5x, the agency said.

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