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Moody’s lowers Revlon, rates loan Ba3
Moody's Investors Service said it downgraded Revlon Consumer Products Corp.'s corporate family rating to B1 from Ba3, probability of default rating to B1-PD from Ba3-PD, senior secured credit facility rating to Ba3 (LGD 3) from Ba2 (LGD 3) and senior unsecured debt instrument rating to B3 (LGD 5) from B2 (LGD 5).
The agency also said it affirmed the company's speculative grade liquidity rating at SGL-1.
The downgrades follow a review for downgrade that began in June following news that the company entered into an agreement to acquire Elizabeth Arden in a transaction valued at about $870 million, which would be financed primarily with new debt, Moody’s said.
The transaction is expected to close during the second half of 2016, subject to customary regulatory and closing conditions, the agency said.
Moody's also said it assigned a Ba3 rating to Revlon's proposed $1.8 billion seven-year senior secured term loan.
The proceeds from the proposed term loan and from a proposed $400 million five-year asset-based revolving credit facility that will not be rated will be used to partly fund the acquisition of Arden, refinance existing Revlon debt and provide liquidity, the agency said.
A $400 million issuance of senior unsecured debt also is planned as part of the transaction financing, Moody’s said.
The outlook is stable.
The downgrades primarily reflect the high financial leverage that will result from the acquisition, along with high execution risks and anticipated earnings volatility related to the company's aggressive plan to extract about $140 million of cost synergies, the agency said.
In recent years, Arden has experienced severe erosion in earnings and cash flow due to competitive pressures, inefficient distribution and a scaled-back innovation pipeline, Moody’s added.
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