Avon refinances with $400m credit facility
The senior secured revolving facility, brokered by Citigroup, Merrill Lynch, Pierce and Fenner & Smith, comes at a crucial point for the company, which now has mounting debts on the back of significant investment in its restructuring program.
Better times ahead?
But after a difficult period, investors and company executives are now hoping that a leaner and more efficient company will re-emerge, enabling the business to pick up again in the future and perhaps making it more appealing to potential investors.
"This new revolver provides us with a five-year maturity and enhanced flexibility under our financial covenants,” said James S. Scully, executive vice president and chief financial officer, Avon Products.
“The new facility is an important part of Avon's ongoing plan to proactively manage our balance sheet and liquidity needs."
More credit flexibility
The credit has been arranged with less restrictive levels and with modifications that include security of certain assets, a limited recourse and that it may be utilized for both working capital, as well as general corporate purposes.
The company is currently struggling under the weight of a significant restructuring program that saw net sales slide by 20% last year to $8bn, and profits also took a big tumble.
Underlying the company’s problems, Avon was dropped from the S&P 500 for the first time in almost 50 years, after its market capitalization was estimated at $3.2bn, significantly below the $10bn minimum requirement for the listing.
Share prices fluctuate
On May 14, a Bulgarian trader, Nedko Nedev, filed a fake takeover bid that overpriced Avon, resulting in a spike in the company’s share price, and a significant fall in the share prices ever since. Avon is now suing Nedev.
In the wake of the fake bid, shares in Avon Products fell to a year low on the stock market at the end of last week, opening for trading on Monday morning at $6.60 a share.
However, news of the new credit facility has helped to trigger a small rebound, with shares closing yesterday at $6.81.