By Wendy Van Sickle
Columbus, Ohio, May 10 – Affinion Group Holdings, Inc. announced the results of its private exchange offers for its $16,111,533 of 13¾%/14½% senior secured PIK/toggle notes due 2018, Affinion Group, Inc.’s $475 million of 7 7/8% senior notes due 2018 and Affinion Investments, LLC’s $22,609,200 of 13½% senior subordinated notes due 2018.
Noteholders validly tendered $4,567,624, or about 28.4%, of Affinion Group Holdings’ 13¾%/14½% PIK/toggle notes; $269,718,000, or about 56.8%, of Affinion Group’s7 7/8% notes; and $12,448,280, or about 55.1%, of Affinion Investments’ 13½% notes, according to a news release.
The company also announced that it plans to redeem all untendered Affinion Group 7 7/8% notes due 2018 as well as Affinion International Holdings Ltd.’s 7½% cash/PIK senior notes due 2018, both at par plus accrued interest.
The exchange offers expired 5 p.m. ET on May 5.
The company accepted all notes validly tendered under the offers.
All noteholders who participated in the exchange offers through their final expiration will receive the total consideration offered for the relevant series of notes, after the company extended the deadline to receive the full consideration on April 17.
Previously, only noteholders who tendered their notes for exchange by the deadline for the concurrent consent solicitation, 5 p.m. ET on April 14, were to receive the total consideration.
The exchange offers and consent solicitations opened on April 3.
For each series of notes, holders were offered either (1) senior notes due 2022 issued by Affinion Group plus new warrants to purchase shares of Affinion Holdings or (2) cash.
For each $1,000 principal amount of notes tendered, holders could elect to receive either (1) $1,000 principal amount of new 12½%/15½% PIK notes due 2022 and warrants to purchase 3.37 shares or (2) cash. The cash amount was $930 for the 7 7/8% notes, $700 for the PIK toggle notes and $880 for the 13½% notes.
As a result of the exchange offers:
• For the Affinion Group 7 7/8% notes, Affinion Group issued about $277.8 million new notes, Affinion Holdings issued warrants to purchase 1.1 million shares of its common stock and Affinion Group paid about $400,000 cash;
• For the Affinion Group Holdings, Inc. 13¾%/14½% PIK/toggle notes, about $4.7 million new notes and warrants to purchase about 18,500 shares of common stock were issued; and
• For the Affinion Investments 13½% notes, about $12.8 million new notes and warrants for about 51,000 shares were issued and about $1,000 cash was paid.
A total of about $532.6 million new notes were issued as a result of the exchange offer, a March 31 investor purchase agreement and a related follow-on agreement, and Affinion Holdings issued warrants for about 4 million shares of common stock. About $2373.3 million of the notes and warrants for about 2.8 million shares were issued to participants in the March 31 investor agreement and related follow-on agreement.
Holders will also receive accrued interest up to but excluding the settlement date. For holders who elect to receive new notes and warrants in exchange for their notes, this interest will be paid in the form of new notes and new warrants. For holders who elect to receive cash in exchange for their notes, this interest will be paid in cash.
For the first 18 months, Affinion Group may elect to pay interest on the new notes (1) entirely in cash at a rate per year of 12½% or (2) entirely in kind at a rate per year of 14%, provided that interest for the first interest period beginning on the settlement date will be payable entirely in kind.
After 18 months, Affinion Group may elect, or may be required, to pay interest on the new notes (i) entirely in cash at a rate per year of 12½%, (ii) as a combination of cash at a rate per year of 6½% and PIK interest at a rate per year of 7½% or (iii) as PIK interest at a rate per year of (x) 14¾% for any interest payment period ending on or prior to the date that is the 30-month anniversary of the settlement date or (y) 15½% for any interest payment period ending after the date that is the 30-month anniversary of the settlement date.
Support agreement
On March 31, a group of noteholders entered into a support agreement under which they agreed to tender their notes in the exchange offers.
The group held about $237.5 million, or 50%, of the 7 7/8% notes and includes, among others, affiliates or managed funds of Elliott Management Corp. and Franklin Mutual Advisers, LLC.
Also on March 31, affiliates of Elliott Management, Franklin Mutual Quest Fund, affiliates of Empyrean Capital Partners, LP and Metro SPV LLC, an affiliate of ICG Strategic Secondaries Advisors LLC, entered into an investor purchase agreement under which they agreed to purchase a principal amount of new notes and new warrants that would yield enough cash proceeds for Affinion to repurchase any notes tendered for cash consideration in the exchange offers. This is referred to as the initial investment.
If Affinion Holdings, Affinion Group or Affinion Investments exercised its option to redeem any notes not tendered in the exchange offers, under the investor purchase agreement, the company had the option to obligate the investors to purchase a principal amount of new notes and new warrants that would yield enough cash proceeds to redeem any notes not tendered in the exchange offers. This is referred to as the follow-on investment. The company elected to exercise that option.
The information and exchange agent for the exchange offers was D.F. King & Co., Inc. (800 848-3416, 212 269-5550 or affinion@dfking.com).
Consent solicitation details
Affinion also announced on April 17 that it had received sufficient consents to make its proposed amendments to the indentures of two of the three series of notes.
The companies solicited consents to amendments to reduce from 30 days to three business days the minimum notice period for optional redemptions.
In addition, Affinion Group solicited consents to remove substantially all of the restrictive covenants and some of the default provisions in the indenture governing the 7 7/8% notes.
The company said the purpose of the exchange offers and related consent solicitations is to extend the maturities of the notes from 2018 to 2022, thereby giving Affinion additional flexibility to execute its strategic initiatives and grow its business.
The exception was Affinion Group Holdings’ 13¾%/14½% senior secured PIK/toggle notes, of which $4,567,624, or about 28.4%, of the principal amount of notes were tendered by the consent deadline.
Of Affinion Group’s7 7/8% notes, $269,693,000, or about 56.8%, were tendered by the consent deadline, and $12,448,280, or about 55.1% of Affinion Investments’ 13½% senior subordinated notes were tendered by the consent deadline.
Notes could not be tendered without consents being delivered. In each case, approval of the proposed amendments required the consent of holders of a majority of the outstanding principal amount of each series of notes, not including notes held by affiliates of Affinion Holdings, Affinion Group or Affinion Investments.
The amount of Affinion Group 7 7/8% notes tendered by the early deadline also was sufficient to meet the minimum exchange condition of 50.1% of the outstanding principal.
New credit facility
Affinion Holdings and Affinion Group also announced on Wednesday that they entered into a new $1.45 billion credit facility with HPS Investment Partners, LLC.
The credit facility consists of a $1.34 billion senior secured term facility and a $110 million revolving credit facility, which will be reduced to $80 million on the one-year anniversary of settlement of the exchange offers.
Affinion is a Stamford, Conn., provider of marketing loyalty products.
| Issuer: | Affinion Group, Inc.
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| Issue: | 12½%/15½% PIK notes
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| Amount: | $532.6 million
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| Maturity: | 2022
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