Affinion Group ends third quarter with $1.48 billion in net debt after Connexions acquisition

By Jennifer Lanning Drey

Savannah, Ga., Oct. 29 - Affinion Group Inc.'s net debt increased to $1.48 billion at the end of the third quarter after the company used $135 million of its cash to complete the purchase of Connexions Loyalty Travel Solutions during the period, Todd Siegel, Affinion's chief financial officer, said Friday during its earnings conference call.

The company's consolidated leverage ratio was 4.75 times at Sept. 30.

Following the close of the quarter, Affinion Group Holdings Inc. completed a private placement offering of $325 million of 11 5/8% senior notes due 2015 that were used with cash to primarily retire the holding company's existing term loans.

The successful refinancing, along with the prior refinancing of Affinion Group's term loan and revolving credit facility have significantly extended the maturities of the company's total debt, Siegel said during the call.

Affinion Group's nearest maturity is now in October 2013.

"We believe this provides us with significant flexibility in operating our business for the foreseeable future," Siegel said.

The CFO also noted that while Affinion did lose some flexibility because it had a PIK election feature on the previous holdings term loan, the company believes the interest required to service the debt is well within its existing coverage ratios.

Adjusted EBITDA, revenues down

Affinion reported third-quarter adjusted EBITDA of $84.0 million, compared with adjusted EBTIDA of $86.1 million for the third quarter of 2009. Net revenues for the third quarter were $346.5 million as compared to $361.1 million for the third quarter of 2009.

For the full-year, the company expects adjusted EBITDA to be relatively flat against 2009 excluding the acquisition of Connexions, primarily due to the level of investment in subscriber acquisition initiatives and programs that the company is forecasting for the fourth quarter, Nathaniel Lipman, its chief executive officer, said during the call.

Lipman also said the company expects a tempering of its near-term revenue growth on a year-over-year basis due to unanticipated delays in the timing of marketing campaigns during the third quarter.

Affinion is a Stamford, Conn.-based provider of marketing services and customer loyalty programs.

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