S&P ups Revlon Consumer Products

Standard & Poor's said it raised its ratings on Revlon Consumer Products Corp., including the company's corporate credit rating, which it raised to B- from CCC+, and removed the ratings from CreditWatch.

Also, S&P raised Revlon Consumer Products' senior secured bank loan to B from B-, senior unsecured debt to CCC from CCC-, and senior subordinated debt to CCC from CCC-.

S&P also assigned a B senior secured bank loan and 1 recovery rating to Revlon's planned $680 million senior secured bank facility. In addition, S&P assigned a CCC senior unsecured debt rating to Revlon's planned $400 million senior unsecured note offering due in 2011.

The outlook is positive.

S&P said the upgrade reflects an anticipated improvement in the company's capital structure following a proposed recapitalization and also takes into account improving company operating trends following performance initiatives implemented in the past two years.

Proceeds from the planned offerings and the conversion of a significant amount of debt to equity by the principal shareholders will be used to recapitalize Revlon, and this will lead to significantly reduced leverage and enhanced liquidity.

In March 2004, MacAndrews & Forbes, Fidelity Management and Research Co., and public bondholders agreed to exchange about $800 million of debt for equity as part of this transaction. MacAndrews & Forbes has also agreed to backstop an equity offering of about $110 million to be completed by March 2006. Proceeds from the transaction will be used to reduce debt.

Leverage and liquidity are expected to improve significantly as a result of these transactions, as total debt to EBITDA would fall to the mid-6x area in 2004 from more than 12x in 2003. Revlon would also have significant borrowing capacity under its revolving credit facility and no significant debt maturities until 2008.

Moreover, S&P said, Revlon demonstrated significant operating improvement in the fourth quarter of 2003 with sales and earnings increases from the comparable period the year before. This improvement resulted from increased investments in promotional spending, better in-store displays and merchandising, improved pricing, and better supply chain management.

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