S&P cuts Avon Products

Standard & Poor’s said it lowered its corporate credit rating on Avon Products Inc. to B from B+. The outlook is stable.

At the same time S&P lowered the issue-level ratings on all of Avon’s senior unsecured debt to B from B+ and revised the recovery ratings on these debt instruments to 4 from 3, indicating an expectation for average recovery of principal in the event of a payment default, at the higher end of the 30% to 50% range.

“The downgrade reflects our belief that Avon’s credit measures will not improve because debt levels will increase once the sale of its North American business to Cerberus Capital Management closes. Moreover, we have revised our profit and cash flow forecast downward given the impact of unfavorable foreign exchange and difficult economic conditions in its key markets,” said S&P credit analyst Mariola Borysiak in a news release.

“We now expect debt leverage to increase to about 6x at end of 2016, well above our previous forecast of 5x.”

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