Avon 2014 Annual Report Download - page 64

PART II
2014 Notes, we incurred a loss on extinguishment of debt of $13.0 in the second quarter of 2013 consisting of the $21.7 make-whole
premium for the 2014 Notes and the write-off of $1.1 of debt issuance costs and discounts related to the initial issuance of the 2014 Notes,
partially offset by a deferred gain of $9.8 associated with the January 2013 interest-rate swap agreement termination. See Note 8, Financial
Instruments and Risk Management on pages F-25 through F-27 of our 2014 Annual Report for more information. In addition, the $250.0
principal amount of our 4.80% Notes due March 1, 2013 and the $125.0 principal amount of our 4.625% Notes due May 15, 2013 were
repaid in full at maturity.
In March 2013, we issued, in a public offering, $250.0 principal amount of 2.375% Notes, due March 15, 2016 (the “2016 Notes”), $500.0
principal amount of 4.60% Notes, due March 15, 2020 (the “2020 Notes”), $500.0 principal amount of 5.00% Notes, due March 15, 2023
(the “2023 Notes”) and $250.0 principal amount of 6.95% Notes, due March 15, 2043 (the “2043 Notes”) (collectively, the “Notes”). The
net proceeds from these Notes were used to repay $380.0 of the outstanding principal amount of the term loan agreement (as defined
below), to prepay the Private Notes (as defined below) and 2014 Notes (plus make-whole premium and accrued interest for both
prepayments), and to repay the 4.625% Notes, due May 15, 2013 at maturity. Interest on the Notes is payable semi-annually on March 15
and September 15 of each year. As a result of the long-term credit rating downgrades by S&P to BB+ (Stable outlook) and by Moody’s to
Ba1 (Stable outlook) (as discussed below), the interest rates on the Notes will increase by .50%, effective as of March 15, 2015.
At December 31, 2014, we also had outstanding $250.0 principal amount of our 5.75% Notes due March 1, 2018 (the “2018 Notes”),
$250.0 principal amount of our 4.20% Notes due July 15, 2018 (the “4.20% Notes”) and $350.0 principal amount of our 6.50% Notes due
March 1, 2019 (the “2019 Notes”). Interest on the 2018 Notes, the 4.20% Notes and the 2019 Notes is payable semi-annually.
The indentures governing our outstanding notes described above contain certain covenants, including limitations on the incurrence of liens
and restrictions on the incurrence of sale/leaseback transactions and transactions involving a merger, consolidation or sale of substantially all
of our assets. In addition, these indentures contain customary events of default and cross-default provisions. Further, we would be required
to make an offer to repurchase the 2018 Notes, the 2019 Notes and each series of the Notes at a price equal to 101% of their aggregate
principal amount plus accrued and unpaid interest in the event of a change in control involving Avon and a corresponding credit ratings
downgrade to below investment grade. In addition, the indenture governing the Notes contains interest rate adjustment provisions
depending on our credit ratings with S&P and Moody’s. As described in the indenture, the interest rates on the Notes increase by .25% for
each one-notch downgrade below investment grade on each of our long-term credit ratings by S&P or Moody’s. These adjustments are
limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the Notes. As a result of the long-
term credit rating downgrades by S&P to BB+ (Stable outlook) and by Moody’s to Ba1 (Stable outlook) (as discussed below), the interest
rates on the Notes will increase by .50%, effective as of March 15, 2015.
Term Loan Agreement
On June 29, 2012, we entered into a $500.0 term loan agreement (the “term loan agreement”). Subsequently on August 2, 2012, we
borrowed an incremental $50.0 of principal from subscriptions by new lenders under the term loan agreement. Borrowings under the term
loan agreement bore interest, at our option, at a rate per annum equal to LIBOR plus an applicable margin or a floating base rate plus an
applicable margin, in each case subject to adjustment based on our credit ratings.
In March 2013, we repaid $380.0 of the outstanding principal amount of the term loan agreement with a portion of the proceeds from the
issuance of the Notes, which repayment resulted in a loss in the first quarter of 2013 of $1.6 on extinguishment of debt associated with the
write-off of debt issuance costs related to the term loan agreement. On July 25, 2013, we prepaid $117.5 of the outstanding principal
balance under the term loan agreement, without prepayment penalties. On June 30, 2014, we paid the $52.5 remaining outstanding
principal balance under the term loan agreement, of which $39.4 was not yet due, without prepayment penalties, effectively terminating
the term loan agreement since amounts thereunder may not be reborrowed.
Private Notes
On March 29, 2013, we prepaid the $535.0 senior notes issued in 2010 in a private placement exempt from registration under the Securities
Act of 1933, as amended (the “Private Notes”). In connection with the prepayment of our Private Notes, we incurred a loss on
extinguishment of debt of $71.4 in the first quarter of 2013, which included a make-whole premium of $68.0 and the write-off of $3.4 of
debt issuance costs related to the Private Notes.