Coty Inc. Prices €500 Million of Senior Secured Notes
Coty has announced the pricing of €500 million in Senior Secured Notes due 2027, with a 4.500% interest rate. The Notes, issued alongside its subsidiaries HFC Prestige Products and HFC Prestige International U.S. , are part of a private offering. Closing is expected on May 30, 2024, pending customary conditions. The proceeds will be used to redeem existing 6.500% Senior Notes due 2026, repay part of its revolving credit facility, and cover offering expenses. The Notes will be secured by first-priority liens, which will be released upon achieving investment-grade ratings from two of three major ratings agencies.
- Coty secures €500 million in funds through Senior Secured Notes.
- Notes have a lower interest rate of 4.500% compared to existing 6.500% Senior Notes.
- Proceeds will help redeem higher-interest debt, reducing future interest expenses.
- Funds will also address outstanding borrowings under the revolving credit facility.
- Collateral security release upon achieving investment-grade ratings signifies potential financial stability.
- New debt issuance increases Coty's overall debt load.
- Redemption of older, higher-interest notes indicates reliance on debt refinancing.
- Collateral security ties the company's assets until investment-grade ratings are achieved.
- Costs associated with the offering will impact immediate cash flow.
Insights
Coty Inc.'s issuance of €500 million in Senior Secured Notes is significant for several reasons, especially for investors keeping an eye on the company's financial health and strategy:
Coty is issuing these notes at a 4.500% interest rate due 2027, which is substantially lower than its existing 6.500% Senior Notes due 2026. This move suggests a strategic refinancing to lower interest expenses, freeing up cash flow in the short term. Such a reduction in interest costs can boost profitability and potentially improve the company's valuation.
The notes are senior secured, meaning they are backed by collateral, ranking higher in the repayment hierarchy if Coty faces financial difficulties. This lowers the risk for noteholders but also indicates that Coty is leveraging its assets to secure better terms. The collateral will be released if the notes achieve investment-grade ratings from two out of three rating agencies, which could significantly enhance their attractiveness in the secondary market.
The proceeds will be used to redeem higher-interest debt and manage borrowings under its revolving credit facility. This prudent debt management can be seen as a positive indication of Coty's financial discipline.
In the short term, this refinancing might lead to a slight decline in net debt but could improve earnings due to lower interest expenses. Long-term effects will depend on Coty's ability to maintain its earnings and cash flow to cover the newly issued debt.
Retail investors should watch for any changes in credit ratings as well as future financial results to gauge the effectiveness of this move.
Understanding the broader market context can help investors see why Coty's move is notable:
The beauty sector is highly competitive, with fluctuating consumer preferences and economic conditions influencing sales. By issuing these notes, Coty is aiming for financial flexibility and better control over its capital structure. This is especially important as the company navigates an evolving market landscape.
Securing financing through senior secured notes, which carry lower interest rates and are prioritized in case of liquidation, indicates a strategic intent to optimize financial stability. This can be seen as Coty's attempt to improve its balance sheet while preparing for potential future investments or acquisitions, which are common in the beauty industry's growth strategy.
From a market perspective, this move may be perceived positively, as it reflects proactive financial management and a focus on long-term stability. However, investors should remain cautious and consider market conditions and Coty’s future performance to fully assess the impact.
Coty Inc. (NYSE:COTY) (Paris:COTY) (“Coty”), one of the world’s largest beauty companies with a portfolio of iconic brands across fragrance, color cosmetics, and skin and body care, today announced the pricing of
The Notes will be senior secured obligations of the Issuers and will be guaranteed on a senior secured basis by each of Coty’s subsidiaries (other than the Co-Issuers) that guarantee, and will be secured by first priority liens on the same collateral that secures, Coty’s obligations under Coty’s existing senior secured credit facilities and senior secured notes. The collateral security will be released upon the Notes achieving investment grade ratings from two out of the three ratings agencies.
Coty intends to use the net proceeds from the offering of the Notes to redeem all of its existing
This press release does not constitute an offer to sell or purchase, a solicitation of an offer to sell or purchase, or a notice of redemption for, the Notes or any of Coty’s securities. No offer, solicitation, purchase or sale will be made in any jurisdiction in which such an offer, solicitation or sale would be unlawful.
The Notes and the related guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state or foreign securities laws, and will be offered only to persons reasonably believed to be qualified institutional buyers in reliance on Rule 144A, and to non-
About Coty Inc.
Founded in
Cautionary Note Regarding Forward-looking Statements
The statements contained in this press release include certain “forward-looking statements” within the meaning of the securities laws. These forward-looking statements reflect Coty’s current views with respect to, among other things, the offering of the Notes and the use of proceeds therefrom. These forward-looking statements are generally identified by words or phrases, such as “anticipate,” “are going to,” “estimate,” “plan,” “project,” “expect,” “believe,” “intend,” “foresee,” “forecast,” “will,” “may,” “should,” “outlook,” “continue,” “temporary,” “target,” “aim,” “potential,” “goal” and similar words or phrases. These statements are based on certain assumptions and estimates that Coty considers reasonable and are not guarantees of Coty’s future performance, but are subject to a number of risks and uncertainties, many of which are beyond Coty’s control, which could cause actual events or results (including Coty’s financial condition, results of operations, cash flow and prospects) to differ materially from such statements, including the Issuers’ ability to consummate the offering of the Notes on a timely basis and on terms commercially acceptable to Coty, or at all, and other factors identified in “Risk Factors” included in Coty’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and its subsequent quarterly reports on Form 10-Q. All forward-looking statements made in this press release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this press release, and Coty does not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
This media release has been prepared on the basis that any offer of Notes in any member state of the European Economic Area (“EEA”) will be made pursuant to an exemption under the Prospectus Regulation from a requirement to publish a prospectus for offers of Notes. For these purposes the expression “Prospectus Regulation” means Regulation (EU) 2017/1129, as amended.
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (“MIFID II”), (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II, or (iii) not a qualified investor as defined in the Prospectus Regulation. Consequently, no key information document required by Regulation (EU) No. 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
MiFID II product governance / Professional investors and ECPs only target market. Manufacturer target market (MiFID II product governance) is eligible counterparties and professional clients only (all distribution channels).
This media release has been prepared on the basis that any offer of the Notes in the
The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the
This media release is only being distributed to and is only directed at: (a) persons who are outside the
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Investor Relations
Olga Levinzon +1 212 389-7733
olga_levinzon@cotyinc.com
Media
Antonia Werther +31 621 394495
antonia_werther@cotyinc.com
Source: Coty
FAQ
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