Avon 2015 Annual Report Download - page 103

Other Financing
Revolving Credit Facility
In June 2015, the Company and Avon International Operations, Inc., a wholly-owned domestic subsidiary of the Company (“AIO”), entered
into a new five-year $400.0 senior secured revolving credit facility (the “2015 revolving credit facility”). The Company terminated its previous
$1 billion unsecured revolving credit facility (the “2013 revolving credit facility”) in June 2015 prior to its scheduled expiration in March
2017. There were no amounts drawn under the 2013 revolving credit facility on the date of termination and no early termination penalties
were incurred. In the second quarter of 2015, $2.5 was recorded for the write-off of issuance costs related to the 2013 revolving credit
facility. Borrowings under the 2015 revolving credit facility bear interest, at our option, at a rate per annum equal to LIBOR plus 250 basis
points or a floating base rate plus 150 basis points, in each case subject to adjustment based upon a leverage-based pricing grid. The 2015
revolving credit facility may be used for general corporate purposes. As of December 31, 2015, there were no amounts outstanding under
the 2015 revolving credit facility.
All obligations of AIO under the 2015 revolving credit facility are (i) unconditionally guaranteed by each material domestic restricted
subsidiary of the Company (other than AIO, the borrower), in each case, subject to certain exceptions and (ii) guaranteed on a limited
recourse basis by the Company. The obligations of AIO and the guarantors are secured by first priority liens on and security interest in
substantially all of the assets of AIO and the subsidiary guarantors and by certain assets of the Company, in each case, subject to certain
exceptions.
The 2015 revolving credit facility will terminate in June 2020; provided, however, that it shall terminate on the 91st day prior to the maturity
of the 2018 Notes, the 4.20% Notes, the 2019 Notes and the 4.60% Notes, if on such 91st day, the applicable notes are not redeemed,
repaid, discharged, defeased or otherwise refinanced in full.
The 2015 revolving credit facility contains affirmative and negative covenants, which are customary for financings of this type, including,
among other things, limits on the ability of the Company, AIO or any restricted subsidiary to, subject to certain exceptions, incur liens, incur
debt, make restricted payments, make investments or merge, consolidate or dispose of all or substantially all its assets. In addition, the 2015
revolving credit facility contains customary events of default and cross-default provisions, as well as financial covenants (interest coverage
and total leverage ratios). As of December 31, 2015, we were in compliance with our interest coverage and total leverage ratios under the
2015 revolving credit facility, and based on then applicable interest rates, the entire $400.0 2015 revolving credit facility could have been
drawn down without violating any covenant.
Letters of Credit
At both December 31, 2015 and December 31, 2014, we also had letters of credit outstanding totaling $12.9, which primarily guarantee
various insurance activities. In addition, we had outstanding letters of credit for trade activities and commercial commitments executed in the
ordinary course of business, such as purchase orders for normal replenishment of inventory levels.
Long-Term Credit Ratings
Our long-term credit ratings are Ba2 (Negative Outlook) for corporate family debt, and Ba3 (Negative Outlook) for senior unsecured debt,
with Moody’s; B+ (Stable Outlook) with S&P; and B+ (Negative Outlook) with Fitch, which are below investment grade. We do not believe
these long-term credit ratings will have a material impact on our near-term liquidity. However, any rating agency reviews could result in a
change in outlook or downgrade, which could further limit our access to new financing, particularly short-term financing, reduce our
flexibility with respect to working capital needs, affect the market price of some or all of our outstanding debt securities, and likely result in
an increase in financing costs, including interest expense under certain of our debt instruments, and less favorable covenants and financial
terms under our financing arrangements.
A V O N 2015 F-21
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