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07 Dec 2006
Moody's assigns ratings to Revlon's new bank facilities
Approximately $1.6 billion in rated debt affected
New York, December 07, 2006 -- Moody's Investors Service today assigned a (P)B1 rating to Revlon Consumer
Products Corporation's (Revlon) $160 million senior secured asset
based revolving credit facility and a (P)B3 rating to the company's new
$840 million senior secured term loan. At the same time,
Moody's affirmed the company's long-term ratings,
including the corporate family rating of Caa1. Moody's also affirmed
the company's speculative grade liquidity rating of SGL-4.
Final ratings are subject to review of documentation. Ratings on
the existing bank facilities will be withdrawn upon completion of the
new term loan facility. The outlook remains negative.
While Moody's recognizes the benefits provided by the new financings
in relation to additional liquidity, term extension (bank facilities
both mature in January 2012), interest savings and greater financial
and covenant flexibility afforded by proposed amendment and refinancing,
Revlon's long-term ratings continue to reflect the ongoing
risk of additional debt restructurings that may be unfavorable to current
bondholders, as well as the significant liquidity and financial
challenges that Revlon will face in the next 6 to 12 months.
The following ratings were assigned:
$160 million senior secured asset based revolving credit facility;
due 2012 at (P)B1 (LGD2, 11%), and
$840 million senior secured term loan facility; due 2012 at
(P)B3 (LGD 3, 36%).
The following ratings were affirmed:
Corporate family rating of Caa1;
Probability of default rating of Caa1;
$160 million senior secured asset based revolving credit facility
of B1; due 2009, of B1 (LGD 2, 11%);
$800 million senior secured term loan facility; due 2010,
of B3 (LGD 3, 35%);
$387 million 9.5% senior notes; due 2011,
of Caa2 (LGD 4, 61%);
$217 million 8.625% senior subordinated notes;
due 2008, of Caa3 (LGD 6, 93%); and
Speculative grade liquidity rating of SGL-4.
Outlook is negative.
"The company's Caa1 corporate family rating and negative outlook
reflect the materially negative free cash flow, high leverage and
weak liquidity profile of Revlon", says Moody's Vice
President Janice Hofferber. Closing of the $840 million
term loan facility and amendment to the $160 million revolving
credit is expected by the end of December 2006. In addition,
Revlon also announced that it intends to increase the size of its previously
planned $75 million rights offering to $100 million and
is expected to complete the offering by the end of January 2007.
MacAndrews and Forbes has agreed to purchase its pro rata share (approximately
$60 million) while maintaining its commitment to backstop the offering
up to $75 million. Upon completion of the rights offering,
the $87 million committed line from MacAndrews & Forbes will
be amended to provide for the continuation of a $50 million line
through January 2008.
The ratings also reflect Revlon's requirement to refinance a portion
or all of its 8 5/8% senior subordinated notes no later than February
2008. While Moody's views the increased equity offering and commitment
by MacAndrews and Forbes as an important mitigant to risks associated
with the high leverage levels, Revlon's sources of available liquidity
will remain dependent upon the ability of the company to successfully
complete critical financings beyond those currently proposed. The
success of these financings is not assured. While the company has
a number of refinancing options, the risk of a refinancing that
is unfavorable to current bondholders remains high given Revlon's continued
weak operating performance and uncertainty surrounding management's
ability to regain market share and restore financial stability following
the unsuccessful launch of Vital Radiance and the costs involved in exiting
Moody's notes that Revlon's persistently negative cash flow generation
-- EBITDA to interest coverage ratios of approximately 0.9x
and high leverage levels of approximately 11x for the LTM period ending
September 2006 (including Moody's standard adjustments for operating leases
and under-funded pension plans) -- significantly
constrain the rating. More importantly, the company's leveraged
profile remains a rating concern as it participates in an industry segment
that requires material upfront brand support, as well as fixture,
and product development expenditures with uncertain consumer receptivity.
Further negative rating actions could be taken if Revlon is not able to
complete its proposed refinancing and rights offering, restore momentum
in its core Revlon brands or if the company's liquidity deteriorates
significantly from current levels. To stabilize the rating outlook,
the company needs to improve its liquidity profile, including a
successful refinancing of its senior subordinated notes in a manner that
is at least neutral to current bondholders.
Revlon's speculative grade liquidity rating of SGL-4 reflects credit
metrics, including cash flow from operations that continue to be
negative and are not likely to turn positive in the near-term.
In addition, Moody's notes that the company has sought four amendments
from its bank group during 2006 and remains at risk of covenant violations
should financial goals not be achieved. While the extension of
the MacAndrews & Forbes committed line of credit through 2007 has
a positive impact on liquidity, Revlon's cash flow from operations
is not sufficient to meet the cash requirements needed to fund its operations
and the payment of the 8 5/8% senior subordinated notes in February
Revlon Consumer Products Corporation (REV), headquartered in New
York, is a worldwide cosmetics, skin care, fragrance,
and personal care products company. The company is a wholly-owned
subsidiary of Revlon, Inc., which in turn is majority-owned
by MacAndrews and Forbes, which is wholly-owned by Ronald
O. Perelman. Revlon's net sales for the twelve-month
period ended September 2006 were approximately $1.4 billion.
Janice Hofferber, CFA
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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