Fitch rates Avon's $1.5 bil­lion Un­se­cured Notes

The Pak Banker - - COMPANIES/BOSS -

Global rat­ing agency Fitch has as­signed a 'BB+ ' rat­ing to Avon Prod­ucts, Inc.'s (Avon) $1.5 bil­lion se­nior un­se­cured notes is­suance with the fol­low­ing tranches:

Avon in­tends to use the net pro­ceeds, to­gether with cash on hand, to re­fi­nance up­com­ing ma­tu­ri­ties and for gen­eral cor­po­rate pur­poses. To­day's ac­tion is in align­ment with man­age­ment's goal of ad­dress­ing the com­pany's cap­i­tal struc­ture.

The new notes con­tain a Change of Con­trol Re­pur­chase Event pro­vi­sion and in­ter­est step-up lan­guage.

Upon the oc­cur­rence of both a Change of Con­trol and rat­ing down­grades be­low in­vest­ment grade by two of the three rat­ing agen­cies, un­less Avon ex­er­cises its right to re­deem the notes, the com­pany will be re­quired to make an of­fer to pur­chase the notes at a price equal to 101% of the ag­gre­gate prin­ci­pal amount plus ac­crued and un­paid in­ter­est. The note in­den­ture con­tains lim­i­ta­tions on liens and sale-lease­backs but does not con­tain fi­nan­cial covenants. In­ter­est could be in­creased by a max­i­mum of 200 ba­sis points in ad­di­tion to the stated rate at is­suance based on the com­pany's rat­ings.

Fitch notes that Avon's $550 mil­lion three-year term loan re­quires that if the com­pany raises at least $500 mil­lion in new debt, 50% of the net pro­ceeds must be ap­plied to­wards this fa­cil­ity. With $1.5 bil­lion in gross pro­ceeds Avon should be able to re­fi­nance the $600 mil­lion in pri­vately placed notes in­clud­ing the $65 mil­lion make-whole and the $125 mil­lion 4.625% note due May 13, 2013 while still ap­ply­ing at least $500 mil­lion in re­quired net is­suance pro­ceeds to its $550 mil­lion term loan due in 2015.

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