S&P cuts Revlon

S&P said it downgraded Revlon Inc. to CC from CCC-, the rating on its Brandco first-lien term loan to CCC- from CCC, the rating on the remaining tranches of secured debt to C from CC, but affirmed the C rating on the company’s two tranches of unsecured notes. The 2 recovery rating on the first-lien loan and the 5 recovery rating on the two tranches of secured debt are unchanged.

“The downgrade follows Revlon’s announcement that it commenced an offer to exchange any and all of its outstanding amounts of 5¾% notes due February 2021 for a combination of new 5¾% notes due February 2024 and an early tender/consent fee. The existing noteholders will receive $750 principal amount of new notes for every $1,000 of existing notes tender and $50 of cash as an early tender/consent fee,” S&P said in a press release.

Those who tender their notes after Aug. 7 will only get $750 in principal of the new notes for every $1,000 of notes tendered.

S&P said it views the exchange as equivalent to default because lenders will get less than the original promise of the security. Also, Revlon’s operating performance has been weak over the past few years, and its unrated $400 million asset-based loan is coming due September, while its unrated foreign ABL facility became current this July, the agency said.

The outlook is negative. S&P said it expects to downgrade Revlon to SD and the 2021 notes to D after the exchange closes.

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