Distressed global beauty company,
Avon Products Inc.
) has moved ahead with its previously planned target of improving
the health of its balance sheet by successfully culminating its
In accordance with its refinancing activities, Avon has closed
a public offering of unsecured notes worth $1.5 billion having
maturities of 3, 7, 10, and 30 years. Excluding the expenses
related to the offering, the company is left with $1.48 billion
as net proceeds. Apart from this, Avon replaced its old $1.0
billion Revolving Credit Facility with a new 4-year $1.0 billion
Revolving Credit Facility.
This largest door-to-door cosmetic seller is planning to
utilize $1.540 billion of net proceeds from refinancing
activities and $650 million of available cash to repay $2.190
billion of debt. Moreover, the remaining funds under the
refinancing activities will provide financial flexibility to
support the company's turnaround strategies.
The company believes that the refinancing activities will
result in a rise of 10% in interest expenses compared with fiscal
2012 owing to increased maturity period and reduced dependency on
floating rate debt. Moreover, the interest expenses will also get
affected, if the company prepays its $65 million and $25 million
worth of notes due in 2014 as a result of one-time charges
related to prepayments.
At the end of fiscal 2012, Avon has cash and cash equivalents
of over $1.2 billion and total debt of approximately $3.2
billion, which included an outstanding debt of $572 million
maturing in fiscal 2013. During the fiscal 2012 it paid $104.3
million as interest expense on these outstanding debts.
Of late, Avon has been facing challenges on various fronts
including declining top and bottom lines and highly-leveraged
In Nov 2012, Avon outlined some strategic measures focused on
accelerating the top-line growth, trimming down costs and
improving working capital. Management is in the process of easing
business issues and directing the company toward growth
trajectory, bringing back its competitive position among peers
As part of its strategy, in November, Avon slashed its
quarterly dividend by 6 cents to 23 cents per share. Management
believes that the reduction in dividend, coupled with efforts to
improve working capital should ease the financial burden on the
Moreover, in Dec 2012, Avon moved ahead with its earlier
announced target of bringing down costs by $400 million through
2015. As the first move toward this direction, the company has
laid down plans to cut about 1,500 jobs globally and cease
operations in the South Korea and Vietnam markets.
We believe that the company's turnaround strategies are paying
of, which is evident from it's recently released fourth-quarter
2012 operating results. After reporting dismal results over the
past 6 quarters, Avon posted better-than-expected total revenue
and earnings results for the fourth quarter.
AVON PRODS INC (AVP): Free Stock Analysis
ESTEE LAUDER (EL): Free Stock Analysis Report
LOREAL CO-ADR (LRLCY): Get Free Report
REVLON INC-A (REV): Free Stock Analysis
To read this article on Zacks.com click here.