Moody's puts Avon Products on review

Moody's Investors Service said it placed on review with direction uncertain the B1 corporate family rating, the B1-PD probability of default rating and the B3 senior unsecured notes rating of Avon Products, Inc.

Moody's also said it placed on review with direction uncertain the Ba1 rating on the $500 million senior secured notes due in 2022 issued by Avon International Operations, Inc., a wholly owned subsidiary of Avon Products.

The outlook on both entities has been changed to rating under review from negative.

The review was prompted by the combined announcement in May from both Avon and Brazilian beauty company Natura & Co that they had reached an agreement on Natura's intention to make an offer to acquire Avons's entire share capital in an all-share transaction, Moody's explained.

The review reflects a view that, should the transaction be finalized, the business profile and financial leverage of the combined group would likely be stronger than those of Avon on a stand-alone basis, resulting in positive rating pressure, the agency said.

Conversely, the failure to complete the merger as scheduled, or a further weakening trend in Avon's earnings or liquidity, could result in a downgrade of Avon's ratings, Moody's said.

This is because of the company's continued weak operating performance to date and an increase in leverage to levels not commensurate with the current B1 rating, as well as the deterioration in the liquidity profile, the agency said.

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