Moody's rates Avon notes A2

Moody's Investors Service said it assigned a rating of A2 to Avon Products, Inc.'s newly issued senior unsecured notes of $250 million due 2013 and $250 million due 2018.

Moody's also affirmed Avon's A2 long-term debt rating as well as Avon Capital Corp.'s Prime-1 commercial paper rating.

The outlook remains negative.

Proceeds will be used to repay commercial paper borrowing.

Avon's A2 rating reflects its position as the world's largest direct selling company, its strong brand recognition, its broad geographic diversification and growing success in developing markets, as well as its historically strong cash flow and relatively conservative financial policy, the agency said.

Ratings are constrained by the company's relatively modest scale for a consumer products company, limited product diversification, recent weakness in mature and developed markets such as the United States and the highly competitive nature of the beauty and personal care category, Moody's said.

Ratings also reflect the risks inherent in a direct selling model, even when this business model is well managed, the agency added.

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