Fitch downgrades Avon

Fitch Ratings said it downgraded Avon Products, Inc.'s long-term issuer default rating to BBB from BBB+, bank credit facilities to BBB from BBB+ and senior unsecured notes to BBB from BBB+.

Fitch also said it affirmed the short-term issuer default rating and commercial paper ratings for Avon and Avon Capital Corp. at F2. Avon Capital's commercial paper is fully guaranteed by Avon Products, Fitch said.

The outlook is negative.

The downgrade and negative outlook reflect Avon's continuing negative free cash flow and management's lack of control over working capital, which are not commensurate with BBB+ ratings, the agency said.

Avon's dividends and capital expenditures in the $700 million range annually mean that cash flow from operations must be substantially larger than the $700 million to $800 million levels seen of late, Fitch said.

The lack of control over working capital is reflected in Avon's allowance for write-offs and returns against accounts receivable, as well as inventory obsolescence, the agency added.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.