S&P downgrades Aimia

S&P said it lowered the long-term corporate credit rating on Aimia Inc. to BB+ from BBB-.

The agency also said it lowered the global scale rating to B+ from BB and its Canada scale rating to P-4 (high) from P-3 on the company's preferred shares.

The BBB- rating on the secured debt is unchanged.

S&P also said it assigned a 2 recovery rating to the debt, indicating 70% to 90% expected default recovery.

The agency said it placed all of the ratings on Aimia on CreditWatch with negative implications.

The downgrades follow news that Air Canada will not renew its contract with Aimia when it expires June 30, 2020, S&P said.

The Aeroplan program drives a significant portion of Aimia's EBITDA and cash flow, the agency said, and this news increases the risk that gross billings will decline and redemptions increase through 2020.

S&P said it believes this structural change could materially weaken the company's medium-term cash flow and growth and raise significant uncertainty about the company's long-term outlook for sustained growth and profitability, factors that do not support an investment-grade rating.

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