AIS HoldCo LLC

The stable outlook reflects our expectation of moderate earnings growth and deleveraging over the next 12 months, resulting in leverage of less than 7x and coverage near 2x. We expect the company to increase its marketing volume significantly, add adjacent products to its product suite, and continue pursuing ad-hoc marketing services contracts. We may lower the ratings in the next 12 months if AIS does not meet our base-case expectations of leverage below 7x or coverage nearing 2x by year-end 2019. This could occur if the firm cannot transform increased marketing volume into actual revenue in the door, or if financial policy is more aggressive than we expect. Although unlikely in the next 12 months, we could raise our ratings

...The company's transition to operating as a stand-alone entity is largely complete, but was slower than anticipated. AIS Holdco LLC (AIS) was carved out of Affinion in 2018 by financial sponsor Mill Point Capital. Since the carve out, AIS has rebranded its operations under the Franklin Madison brand, an ode to the Madison Financial name of the 1960s. The new branding has been received favorably by current and potential customers. Operationally, the transition took longer than expected, which delayed investments to grow the business after years of underinvestment. AIS ramps up its marketing outreach. Because AIS is now a stand-alone entity, its management team is increasing its marketing efforts substantially. Previously it was pegged to around 55 million pieces of mail per year; now it's expanding to an expected 63 million pieces of mail for 2019. S&P Global Ratings views this as a credit positive, as success in direct-to-consumer marketing is the backbone of AIS's business. Nevertheless,...

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