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Rating Action:

Moody's assigns B1 rating to Herbalife bond offering; outlook stable

06 Aug 2018

New York, August 06, 2018 -- Moody's Investors Service ("Moody's") assigned a B1 (LGD4) rating to HLF Financing SaRL, LLC's proposed $400 million offering of senior unsecured bonds. HLF Financing SaRL, LLC is a wholly owned subsidiary of Herbalife Nutrition Ltd. ("Herbalife"; formerly Herbalife Ltd). The proceeds from the proposed unsecured bond and senior secured term loans will be used to refinance existing debt, to pay transaction fees and expenses and for balance sheet cash. The rating outlook is stable.

The B1 rating on the unsecured notes is one notch lower than Herbalife's Ba3 Corporate Family Rating ("CFR"). This reflects Moody's expectation of a meaningful amount of proposed secured debt that will rank ahead of the unsecured notes in the capital structure. See Moody's July 30, 2018 press release for other details regarding Herbalife's proposed refinancing. The refinancing is credit positive because it will extend maturities and lower cash interest costs.

Ratings assigned:

HLF Financing SaRL, LLC

$400 million GTD Senior Unsecured Notes at B1 (LGD4)

Herbalife International, Inc. is a co-borrower on the proposed bond offering.

The rating outlook is stable.

Herbalife is the parent company of Herbalife International, Inc., Herbalife International Luxembourg S.a.r.l, HLF Financing US, LLC and HLF Financing SaRL, LLC.

RATINGS RATIONALE

The Ba3 CFR reflects Herbalife's narrow product line, operation in the highly competitive weight-loss and wellness markets subject to frequent new entrants and shifting consumer preferences, combined with the inherent risks related to multi-level marketing. The company's global multi-level marketing structure increases the risk of adverse regulatory and/or legal actions, and Moody's recognizes the potential for future actions by regulatory authorities. Debt will be used to refinance existing debt and financial leverage (debt/EBITDA) will be at about 3.7x at close. Further, Moody's expects leverage to remain relatively flat at about 3.5x within 12 months following close of the transaction, reflecting debt paydown with the company's significant cash flow. The rating is also supported by the company's good profitability, and significant geographic diversification. Good liquidity is supported by a sizable $839 million cash balance (as of June 30, 2018) projected free cash flow, and the undrawn revolver. These cash sources provide good coverage of the remaining $675 million convertible notes maturing in August 2019, although the notes are currently in-the-money.

The stable outlook reflects Moody's view that Herbalife's financial leverage will steadily improve due to debt repayment and the company's significant cash flow. The outlook also reflects Moody's view that the company will continue to face the fundamental risks of the multi-level marketing business model.

The rating could be downgraded if Herbalife's operating performance deteriorates, or if there is an adverse shift in the industry's regulatory environment. Ratings could also be downgraded if debt/EBITDA is sustained above 4.0x, or if liquidity deteriorates.

The rating could be upgraded if the company achieves greater scale, profitability improves, and Moody's gains greater comfort with the industry's regulatory environment and business model. The rating could also be upgraded if Herbalife demonstrates that it will maintain a more conservative financial policy and meaningfully reduces leverage.

The principal methodology used in these ratings was Global Packaged Goods published in January 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Based in Los Angeles, CA, Herbalife Nutrition Ltd. is a leading direct-seller of weight management products, nutritional supplements and personal care products intended to support a healthy lifestyle. The company operates through a multi-level marketing system that consists of approximately 4.1 million global members across 94 countries. Publicly-traded Herbalife generates roughly $4.5 billion in annual revenues.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Chedly Louis
VP - Sr Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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