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Rating Action:

Moody's upgrades Revlon's CFR to Ba3; assigns B1 rating to proposed note offering

05 Feb 2013

Approximately $1.4 billion in rated debt affected

New York, February 05, 2013 -- Moody's Investors Service today upgraded the Corporate Family Rating and Probability of Default Rating of Revlon Consumer Products Corporation ("Revlon") to Ba3 and Ba3-PD, respectively. Moody's also upgraded the company's $800 million senior secured term loan to Ba2 and its Speculative Grade Liquidity Rating to SGL-1. A B1 rating was also assigned to Revlon's $400 million proposed senior unsecured notes offering due February 2021. The ratings of Revlon's existing 9 ¾% senior secured notes due 2015 will be withdrawn upon successful completion of the tender offer which expires on February 26, 2013. The outlook is stable.

The upgrade of Revlon's Corporate Family Rating to Ba3 reflects its trackrecord of strong positive free cash flow, sustained profitability and solid organic growth over the last several years. Moody's expects Revlon to further delever over the next 12 to 18 months with leverage expected to decline and be sustained below 4.5 times.

The following ratings of Revlon were upgraded:

- Corporate Family Rating to Ba3 from B1;

- Probability of Default rating to Ba3-PD from B1-PD;

- $800 million senior secured term loan facility due November 2017 to Ba2 (LGD 2, 26%) from Ba3 (LGD 3, 30%); and

- Speculative Grade Liquidity Rating to SGL-1 from SGL-2.

The following ratings of Revlon were assigned:

- $400 million senior unsecured notes due 2021 at B1 (LGD 5, 80%)

The following ratings will be withdrawn upon successful completion of the tender offer:

- $330 million 9 ¾% Senior Secured Notes due November 2015 at B2 (LGD 5, 72%)

Outlook is stable.

RATINGS RATIONALE:

Revlon's Ba3 Corporate Family Rating reflects the company's global brand franchises, strong geographic and product diversification for a number of well known beauty brands and sustained strong profitability and consistent free cash flow generation (EBIT margins of approximately 16%; free cash flow-to-debt of over 6%). Revlon's ratings are constrained by its limited scale in the highly competitive cosmetics category characterized by deep-pocketed, global competitors. The company's liquidity profile is very good with no material debt maturities, ample availability under a committed and long-dated $140 million revolving credit facility (unrated) and maintenance of significant cash balances.

We expect the company's recent operating and financial improvements to be sustained despite the ongoing macroeconomic challenges especially in Europe and potential for slow growth in key emerging markets such as China. Continued weakness of its Almay color cosmetics brand will likely continue and require additional investment in brand development and promotion.

Despite these challenges, Moody's expects the company's profitability to remain relatively stable. More importantly, having improved its financial profile over the last several years, Revlon has sufficient financial flexibility to maintain its investment in product development, required display spending and necessary brand promotion and advertising needed to maintain its market share and drive organic growth. Although cash flow will be impacted in 2013 by costs associated with the company's operational realignment and to settle litigation; Moody's expects free cash flow to be strong and provide for modest deleveraging over the next 12 to 18 months..

"Revlon is well positioned to build on the sales momentum across all major geographies and for its core Revlon brands, including its mature U.S. business, generating continued strong organic growth at least in line with the industry," says Moody's Senior Vice President Janice Hofferber, CFA. "This sustained operating performance combined with its multi-year deleveraging and very good liquidity profile should provide significant financial flexibility to support new product development and brand awareness critical in the highly competitive global cosmetics category," adds Ms. Hofferber.

Revlon's ratings could be upgraded if the company is able to maintain an above average organic growth rate, improved market share for its core Revlon and Almay brands and sustain credit metrics including debt-to-EBITDA well below 4.0 times and EBIT-to-interest expense of at least 3.0 times.

Revlon's ratings could be downgraded if the company's operating performance deteriorates such that EBIT margins drop below 12%, debt-to-EBITDA is sustained above 5.0 times or EBIT-to-interest expense drops below 2.0 times. Any shift in the financial policy of Revlon or of its majority-owner, M&F, towards debt-financed acquisitions and share repurchases, could also result in a downgrade.

Headquartered in New York, Revlon Consumer Products Corporation ("Revlon") is a worldwide cosmetics, skin care, fragrance, and personal care products company. The company is a wholly-owned subsidiary of Revlon, Inc., which is majority-owned by MacAndrews & Forbes ("M&F"), which is in turn wholly-owned by Ronald O. Perelman. Revlon's principal brands include Revlon, Almay, Sinful Colors, Pure Ice, Charlie, Jean Nate, Mitchum, Gatineau, and Ultima II. Revlon's net sales for the fiscal year ended December 31, 2012 were nearly $1.4 billion.

The principal methodology used in rating Revlon was the Global Packaged Goods published in December 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

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.

Janice Hofferber, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

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

Moody's upgrades Revlon's CFR to Ba3; assigns B1 rating to proposed note offering
No Related Data.
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