Moody's rates American Greetings notes B3

Moody's Investors Service said it assigned a B3 (LGD6, 91%) rating to the new $275 million PIK toggle notes due 2019 to be issued by Century Intermediate Holding Co. 2, the indirect parent of American Greetings Corp.; upgraded American Greetings' $225 million senior notes to B2 (LGD4, 65%) from B3 (LGD5, 81%) and affirmed its senior secured credit facilities at Ba2 (LGD2, 20%).

The following ratings were assigned to Century and will be withdrawn from American Greetings following the close of this transaction: B1 corporate family rating, B1-PD probability of default rating and SGL-2 speculative grade liquidity rating. The outlook is stable

The note proceeds will be used to refinance about $247 million of unrated preferred stock held at Century Intermediate Holding Co., to fund about $32 million of prepayment penalty fees and to pay a dividend of about $35 million. The dividend will go to a related company outside of the restricted group that will finance the building of a new company headquarters.

The upgrade of American Greetings' senior notes is a result of the increase in junior debt capital, the agency noted.

Moody's said the B1 corporate family rating reflects the company's elevated leverage profile following the management buyout of the company and the business risks inherent in the greeting card industry, which is characterized by low or in some cases declining growth rates, weak customer loyalty from a branding perspective and heavy competition.

In the agency's view, the ratings are supported by the company's solid position in the U.S. and U.K. greeting card industries, its long operating history, the predictable demand for its products and important long-standing relationships with retail customers.

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