AIM: S&P Revises Outlook To Negative

Standard & Poor’s has announced:

  • •We are revising our outlook on Montreal-based Aimia Inc. to negative from stable and affirming our ratings on the company, including our ‘BBB-‘ long-term corporate credit rating.
  • •In our opinion, Aimia’s competitive position has deteriorated based on the prospect of lower growth, which contributes to a weaker assessment of Aimia’s business profile and tighter leverage threshold to maintain the investment-grade rating.
  • •We estimate the company will generate adjusted debt-to-EBITDA of 2.6x-2.8x at the end of this year, which we consider high for the rating given our revised view of the business.
  • •The negative outlook reflects our uncertainty about the company’s ability to sustain adjusted debt-to-EBITDA of about 2x beyond 2018.


“The outlook revision reflects our view that Aimia’s competitive position has deteriorated based on lower growth prospects,” said S&P Global Ratings credit analyst Alessio Di Francesco.

This contributes to a weaker assessment of Aimia’s business risk profile and a tighter leverage threshold to maintain the investment-grade rating.

In our opinion, Aimia’s growth outside of Canada should remain subdued from competitive pressures and challenging economic conditions. As such, we believe the Aeroplan program will continue to be the main driver of free cash flow for the company in the future. Although we expect positive gross billings growth and improved profitability within the program in the next couple of years, we believe EBITDA growth is below what we had previously expected. Moreover, Aimia’s commercial partnership services agreement with Air Canada expires in 2020, and we believe the renegotiation may expose the company to higher costs, lower margins, and conceivably weaker engagement. On the other hand, a new agreement could add new avenues for redemption and engagement.

We could lower the rating by the end of 2018 if adjusted debt-to-EBITDA does not improve to about 2x, in line with our base-case forecast. This could occur if we expect gross billings or EBITDA margins to decline at Aeroplan or if an increase in distributions contributes to negative discretionary cash flow.

We could revise the outlook to stable within the next 24 months if adjusted debt-to-EBITDA improves in line with our expectations and we believe the company will sustain leverage of about 2.0x beyond 2018.

Issues affected are AIM.PR.A, AIM.PR.B and AIM.PR.C.

4 Responses to “AIM: S&P Revises Outlook To Negative”

  1. dodoi says:

    Sorry to comment on an older post, but it seems there are more bad news for Aimia since:

    “May 11 (Reuters) – Air Canada said on Thursday it would launch its own loyalty program in 2020, replacing the current program, Aeroplan, which is owned and operated by analytics firm Aimia Inc.”

    On another hand Aimia announced:

    “Aimia Inc. (TSX: AIM) (the “Corporation”) announced today that it has issued a notice for the redemption prior to maturity of all of its outstanding $200,000,000 principal amount of 4.35% Senior Secured Notes Series 5 due January 22, 2018 (CUSIP No. CA00900QAD57) (the “Series 5 Notes”). The redemption date as set forth in the notice of redemption is June 9, 2017 (the “Redemption Date”).”

    Would this mean that its preferred shares could be redeemed in the future since they pay more than 4.35% (GoC5 +3.75 and +4.20)

  2. hrseymour says:

    S&P went through with the downgrade:

    “Aimia Inc. Downgraded To ‘BB+’ From ‘BBB-‘ On Air Canada Non-Renewal Plans; Put On CreditWatch Negative”

    “S&P Global Ratings also lowered its 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.”

    http://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/1848527

  3. jiHymas says:

    Would this mean that its preferred shares could be redeemed in the future since they pay more than 4.35% (GoC5 +3.75 and +4.20)

    I don’t think it’s an indicator. The notes are simply being redeemed six months early, that’s all.

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