Moody's Places Avon (AVP) Ratings on Review for Downgrade
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Moody's Investors Service placed Avon Products, Inc.'s (NYSE: AVP) Baa2 senior unsecured and Prime-2 commercial paper ratings on review for downgrade. The review is prompted by the ongoing challenges Avon faces to stabilize its operations and cash flow, potential for incremental restructuring actions, and the risks associated with the company's settlement discussions with the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ) related to compliance with the Foreign Corrupt Practices Act (FCPA) and associated U.S. and foreign laws.
Review for Downgrade:
..Issuer: Avon Products, Inc.
....Senior Unsecured Regular Bond/Debentures, at Baa2
....Senior Unsecured Shelf, at (P)Baa2
..Issuer: Avon Capital Corporation
.... Commercial Paper, at Prime-2
RATINGS RATIONALE
In the review, Moody's will evaluate Avon's strategies to stabilize and restore revenue growth, improve representative relationships, and adjust the cost base. This will include a review of economic conditions and the competitive environment in Avon's operating regions, and an assessment of the company's efforts to rationalize underperforming product lines and improve pricing discipline. Moody's will also evaluate the range of potential outcomes with the SEC and DOJ, and the company's abiity to fund any monetary penalties and implement compliance actions. Finally, Moody's will assess Avon's financial position including projected cash flow, credit metrics, dividend policy, and liquidity.
The principal methodology used in this rating was Global Packaged Goods published in June 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Review for Downgrade:
..Issuer: Avon Products, Inc.
....Senior Unsecured Regular Bond/Debentures, at Baa2
....Senior Unsecured Shelf, at (P)Baa2
..Issuer: Avon Capital Corporation
.... Commercial Paper, at Prime-2
RATINGS RATIONALE
In the review, Moody's will evaluate Avon's strategies to stabilize and restore revenue growth, improve representative relationships, and adjust the cost base. This will include a review of economic conditions and the competitive environment in Avon's operating regions, and an assessment of the company's efforts to rationalize underperforming product lines and improve pricing discipline. Moody's will also evaluate the range of potential outcomes with the SEC and DOJ, and the company's abiity to fund any monetary penalties and implement compliance actions. Finally, Moody's will assess Avon's financial position including projected cash flow, credit metrics, dividend policy, and liquidity.
The principal methodology used in this rating was Global Packaged Goods published in June 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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