(The following was released by the rating agency) Overview
-- U.S.-based online social media company FriendFinder has experienced declining subscriptions and weak operating results over the past year.
-- We are lowering our corporate credit rating on the company to 'B-' from 'B', and placing the rating on CreditWatch with negative implications.
-- The negative CreditWatch listing reflects the potential for a downgrade if the company cannot reverse current operating trends and credit metrics continue to deteriorate.
On Feb. 29, 2012, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Boca Raton, Fla.-based FriendFinder Networks Inc. to 'B-' from 'B'. All issue-level ratings on the company's debt have also been lowered by one notch in conjunction with the downgrade. In addition, we have placed the ratings on CreditWatch with negative implications. Rationale The rating actions reflect the uncertainty around paid adult social media and daily deals Web sites, and the potential repercussions for FriendFinder's credit profile.
As stated in our Nov. 21, 2011 research update report, our view on FriendFinder reflects "the company's declining paid subscriptions and the likelihood that operating results will continue to be weak over the near term." We expect that continued economic headwinds and negative business momentum will remain a drag on results. Total subscribers at the company's adult Web sites, primarily AdultFriendFinder.com, fell 13% during the 12 months ending Sept. 30, 2011. Revenue has fallen during each of the first three quarters of 2011.
CreditWatch The negative CreditWatch implications reflect our view of the difficulty that FriendFinder faces in reversing current negative trends in subscriber growth and revenues. We could lower the rating if subscriber levels and revenues continue to decline and financial metrics continue to deteriorate.