Approximately $1.3 billion in rated debt affected
New York, April 07, 2011 -- Moody's Investors Service today upgraded Revlon Consumer Products Corporation's
("Revlon") Corporate Family and Probability of Default ratings to B1 from
B2. Moody's also upgraded the company's $140
million asset backed revolving credit facility to Ba1 from Ba2 and its
$330 million senior secured notes to B2 from B3. Revlon's
$800 million secured term loan facility rating of Ba3 and Speculative
Grade Liquidity rating of SGL-2 were both affirmed. The
outlook is stable.
The upgrade of Revlon's Corporate Family rating to B1 reflects the
company's ability to sustain operating and financial momentum despite
the ongoing challenges of the macroeconomic environment and intensified
competitive environment. Revlon's credit metrics continue
to improve modestly driven by strong profitability and cash flow generation
with further gains expected in fiscal 2011.
"Revlon is well positioned to build on the sales momentum across
all of its geographies and brands, including its mature U.S.
business, generating strong organic growth of 9% in the fourth
quarter," says Moody's Vice President and Senior Credit
Officer Janice Hofferber. "This acceleration of brand performance
combined with its multi-year deleveraging and strong liquidity
profile should provide significant financial flexibility to support new
product development and brand awareness critical in the high competitive
global cosmetics category," adds Ms. Hofferber.
Revlon's B1 corporate family rating reflects the company's global brand
franchises, strong geographic and product diversification for a
number of well known brands in color cosmetics, hair color and fragrances,
and sustained strong profitability (fiscal 2010 EBITA margins of 16.2%)
and cash flow metrics (fiscal 2010 Free Cash Flow to Debt of 6.9%).
Revlon's ratings are constrained by its still relatively high adjusted
leverage (fiscal 2010 Debt to EBITDA of 5.4 times) and limited
scale in the highly competitive cosmetics category characterized by deep-pocketed,
We expect Revlon's profitability to be sustainable despite ongoing investments
needed to maintain revenue growth and market share including significant
product development, product display capital outlays and brand advertising
and promotional spending. However, Revlon's ratings will
remain somewhat constrained by the highly competitive nature of the cosmetics
and personal care category in which it operates and the company's still
relatively high adjusted leverage (5.4 times).
The following ratings of Revlon were upgraded:
- Corporate family rating to B1 from B2;
- Probability of default rating to B1 from B2;
- $140 million senior secured asset based revolving credit
facility due March 2014 to Ba1 (LGD 1, 1%) from Ba2 (LGD
1, 2%); and
- $330 million 9 ¾% Senior Secured Notes due
2015 to B2 (LGD 5, 72%) of B3 (LGD 5, 74%).
The following ratings of Revlon were affirmed (LGD assessments revised):
- $782 million senior secured term loan facility due March
2015 at Ba3 (LGD 3, 30%).
- Speculative grade liquidity rating of SGL-2
Outlook is stable
We note that although the Ba3 rating on the senior secured term loan has
remained unchanged, the four-year loss rate on the instrument
has improved to 4.54%, following the Corporate Family
Rating's upgrade to B1, from 5.95% at a B2 Corporate
Family Rating. The upper bound on the four-year loss rate
for a Ba3-rated instrument is 4.49%.
Revlon's ratings could be upgraded if the company was able to continue
to demonstrate consistent above average organic growth, improved
market share for its core Revlon and Almay brands and sustain credit metrics
including Debt-to-EBITDA below 4.5 times and EBITA-to-interest
expense of at least 3.0 times.
Revlon's ratings could be downgraded if the company's operating
performance deteriorated such that EBITA margins dropped below 12%,
Debt-to-EBITDA exceeded 5.5 times or EBITA-to-interest
expense dropped below 1.5 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.
The last rating action regarding Revlon was on February 25, 2010
when Moody's affirmed the company's ratings, including
its Corporate Family rating and Probability of Default rating of B2 and
its Speculative Grade Liquidity rating of SGL-2 and assigned ratings
of Ba2 and Ba3 to the company's proposed $140 million asset-based
revolving credit facility and its $800 million senior secured term
loan, respectively. The stable outlook was unchanged.
For additional information, please refer to Moody's Credit Opinion
on Revlon available on www.moodys.com.
The principal methodology used in rating Revlon was the Global Packaged
Goods methodology published in July 2009 and available on www.moodys.com
in the Ratings Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the rating process of rating Revlon can also be found in
the Rating Methodologies sub-directory on Moody's website.
Headquartered in New York, Revlon Consumer Products Corporation
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 net sales for the twelve-month
period ended December 2010 were approximately $1.3 billion.
M&F beneficially owns approximately 77% of Revlon's outstanding
Class A common stock, 100% of Revlon's Class B common stock
and 78% of Revlon's combined outstanding shares of Class A and
Class B common stock, which together represent approximately 77%
of the combined voting power of such shares.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Janice Hofferber, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades Revlon's ratings, including CFR to B1
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New York, NY 10007