Avon 2015 Annual Report Download - page 71

Off Balance Sheet Arrangements
At December 31, 2015, we had no material off-balance-sheet arrangements.
Capital Resources
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 (as defined below), the 4.20% Notes (as defined below), the 2019 Notes (as defined below) and the 4.60% Notes (as
defined below), 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.
Public Notes
In March 2013, we issued, in a public offering, $250.0 principal amount of 2.375% Notes due March 15, 2016 (the “2.375% Notes”),
$500.0 principal amount of 4.60% Notes due March 15, 2020 (the “4.60% Notes”), $500.0 principal amount of 5.00% Notes due
March 15, 2023 (the “5.00% Notes”) and $250.0 principal amount of 6.95% Notes due March 15, 2043 (the “6.95% Notes”) (collectively,
the “2013 Notes”). The net proceeds from these 2013 Notes were used to repay outstanding debt. Interest on the 2013 Notes is payable
semi-annually on March 15 and September 15 of each year. On August 10, 2015, we prepaid our 2.375% Notes at a prepayment price
equal to 100% of the principal amount of $250.0, plus accrued interest of $3.1 and a make-whole premium of $5.0. In connection with the
prepayment of our 2.375% Notes, we incurred a loss on extinguishment of debt of $5.5 in the third quarter of 2015 consisting of the $5.0
make-whole premium for the 2.375% Notes and the write-off of $.5 of debt issuance costs and discounts related to the initial issuance of
the 2.375% Notes.
The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the long-term credit ratings assigned to
the 2013 Notes with S&P and Moody’s. As described in the indenture, the interest rates on the 2013 Notes increase by .25% for each one-
notch downgrade below investment grade on each of our long-term credit ratings assigned to the 2013 Notes 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 2013 Notes. As a
result of the long-term credit rating downgrades by S&P in November 2014 to BB+, in February 2015 to BB and in June 2015 to B+, and by
Moody’s in October 2014 to Ba1 and in May 2015 to Ba3 for senior unsecured debt, the interest rates on the 2013 Notes have increased by
1.75%, of which .75% was effective as of March 15, 2015 and 1.0% was effective as of September 15, 2015.
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