Affinion Group holders exchange 95% of PIK notes, 93.7% of 13½% notes

By Susanna Moon

Chicago, Nov. 10 – Affinion Group Holdings, Inc. said investors had tendered for exchange $247,405,368, or 95%, of the 13¾%/14½% senior secured PIK/toggle notes due 2018 and $337,346,520, or 93.7%, of the 13½% senior subordinated notes due 2018 issued by Affinion Investments, LLC.

As a result, Affinion Holdings issued 7,005,621 shares of new common stock in exchange for the tendered notes, according to a company press release.

The exchange offer ended at 11:59 p.m. ET on Nov. 3, extended from 11:59 p.m. ET on Oct. 27.

After settlement, there will be left outstanding about $13.1 million principal amount of PIK notes and $22.6 million principal amount of 13½% notes.

The subscription deadline for the concurrent rights offering was 11:59 p.m. ET on Nov. 4, extended from 11:59 p.m. ET on Oct. 28 and 11:59 p.m. ET on Oct. 13.

In the rights offering, the companies accepted all of the subscriptions for $94,099,000 principal amount of new international notes and 2,124,333 shares of new common stock, of which 1,754,058 shares were issued and the rest was issued as non-participating penny-warrants for up to 370,275 shares of new common stock.

The remaining $15,901,000 principal amount of new international notes and 358,975 shares to be issued in the rights offering were purchased by one of the significant holders under the backstop agreement, the release noted.

After the exchange offers and the rights offering, Affinion Holdings had issued 9,118,654 shares and limited warrants for up to 370,275 shares. Affinion International issued $110 million principal amount of new international notes for a purchase price of $110 million, the release said.

Affinion previously said that it had met the minimum tender thresholds in the exchange offers as of 4:15 p.m. ET on Nov. 2 with tenders for $247,405,368 principal amount, or 95%, of the PIK notes and $337,346,520 principal amount, or 93.7%, of the 13½% notes.

On Oct. 28, the company reduced the threshold to $247,405,368 for the PIK/toggle notes and $336,530,520 for the 13½% notes.

Before the changes, the exchange offers had been conditioned on the tender of at least 95% of each note series.

On that date, the company also decided to pay the total purchase price to all who tender. Previously, the full payment was on offer only to those who tendered by the consent deadline, 11:59 p.m. ET on Oct. 14.

Offer details

As announced on Sept. 30, the company was offering to exchange the notes for common stock.

Affinion Holdings and Affinion International Holdings Ltd. previously also announced a rights offering for holders of the two series of notes in which they will be able to purchase a total of $110 million of 7½% cash/PIK senior notes due 2018 of Affinion International and 2,483,333 shares of common stock for a total of $110 million in cash.

Affinion previously said that it hoped to cut its debt by $600 million and its annual cash interest payments by $50 million through the exchange offers.

Along with the cash raised from the rights offering, the exchange will also “provide additional flexibility for the company to execute its strategic initiatives and grow its business,” according to an earlier release.

Under the exchange, the 13¾%/14½% notes will be exchanged for 7.15066 shares. Originally, investors would have received 6.15066 shares if notes were tendered after the consent deadline.

The 13½% notes will be exchanged for 15.52274 shares and would have been exchanged for 14.52274 shares if notes were tendered after the consent time.

No payment will be made for accrued interest.

More information

Affinion previously said that holders of 86% of each series of the existing notes entered into support agreements.

The holders include funds managed by Allianz Global Investors U.S. LLC, funds and accounts managed by Ares Management LLC and affiliates, funds and accounts managed by Empyrean Capital Partners, LP, funds managed by PennantPark Investment Advisers, LLC and Third Avenue Trust, on behalf of Third Avenue Focused Credit Fund.

Under the support agreements, the funds had agreed to tender their notes into the exchange.

One of the holders that signed the support agreement also agreed to backstop the rights offering by agreeing to buy any new notes and stock that are not purchased by other holders.

In the consent solicitation that ran concurrently with the exchange, Affinion asked holders of the 13¾%/14½% notes to agree to remove substantially all of the restrictive covenants and certain of the default provisions and to release the collateral securing the notes and holders of the 13½% notes to agree to remove substantially all of the restrictive covenants and certain of the default provisions.

To amend the notes, Affinion needed consents from holders of a majority of the notes or, to release the collateral, two-thirds of the notes.

The information and exchange agent is Prime Clerk LLC (855 650-7243 or 917 877-5364).

Rights offer

In the rights offering, Affinion was offering units of the new notes and 22.57576 shares at a price of $1,000 per unit. Out of the total, 25% of the rights will be allocated to holders of the 13¾%/14½% notes and 75% to holders of the 13½% notes.

After the exchange offers, consent solicitations and rights offering, Affinion converted its existing class A stock into class C stock to represent 5% of the outstanding common stock, and class D stock that on conversion to represent 5% of the common stock.

Affinion is a Stamford, Conn., provider of marketing loyalty products.

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