The new plan will see the completion of a public offering of $1.5 billion in notes, as well as entering into a $1 billion four-year unsecured Revolving Credit Facility Agreement, which replaces the previous $1 billion Revolving Credit Facility Agreement.
"Through this refinancing, we have achieved increased financial flexibility, which is critical to our ability to successfully execute Avon's turnaround," said Kimberly Ross, Executive Vice President & Chief Financial Officer, Avon Products.
"Our refinancing activities have improved our balance sheet, and we are pleased with the outcome."
Time to turn things around
The beauty behemoth has reported growing losses, particularly in the past year, as issues with the business structure, corruption charges in Asia, distribution problems in Brazil and slower sales in both North America and Europe have continued to dog the business.
Revenues fell throughout 2012, although for the final quarter, the fall did show signs of slowing down, with local sales down just 1 percent to $3.0bn for the quarter, while the company registered a net loss of $162m on the back of substantial restructuring charges.
It is the ambitious restructuring program, which is also contributing to the debts levels and has been hurting the company most.
The restructuring program aims to cut a total of $400m related to administrative, sales and general costs, but before the benefits of those savings can be enjoyed, the company has to pay out significant sums to implement the program.
Right now Avon’s total debt is estimated to be $3.2bn; a figure that made refinancing a top priority if the company wants to ensure financial sustainability.
Debt repayment
As such, the refinancing will also aim to repay $1.9 billion of the debt including: $380 million of the $550 million term loan; $125 million 4.625% Notes due May 15, 2013 at maturity; $535 million private notes; anticipated redemption of $500 million 5.625% Notes due 2014; and $250 million 4.80% Notes due March 1, 2013 paid with cash on hand.
Avon expects interest expense in 2013 to increase approximately 10 percent as compared to 2012 as it extended its maturity profile and decreased reliance on floating rate debt.
In addition, interest expense will be impacted by one-time charges associated with make-whole premiums related to the prepayment of the private placement notes of $65 million and $25 million if the company prepays its Notes due in 2014.