Avon planning bond offering to refinance debt, report claims

By Simon Pitman

- Last updated on GMT

Related tags Finance

Avon Products, which is facing the problem of sliding sales and mounting debts, is said to be planning a three-part bond offering in an attempt to refinance the debt.

The offerings will consist of a three-, seven- and ten-year securities, a Bloomberg report quotes a person who is familiar with the negotiation and transaction process as saying in an unauthorized discussion.

A regulatory filing later confirmed that Avon aims to use the proceeds of the refinancing to repay off some of its debts, as well as funding general corporate expenses and investments.

Fallings revenues, mounting costs, bigger debts

Avon 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.

In the previous quarter, the company posted one of the biggest drops in revenues in its history, with sales down 8 percent to $2.6bn, which meant net profits for the period fell by $165m to just $32m.

Restructuring also hurting

However, what has really been hurting profits in recent quarters is the company’s comprehensive and ambitious restructuring program, which is also contributing to the debts levels.

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 is having to pay out significant sums to implement the program.

Right now Avon’s total debt is estimated to be $3.2bn, a figure that makes refinancing a top priority if the company wants to ensure financial sustainability.

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