Coty Inc. to Offer Senior Secured Notes
Coty announces the launch of a €500 million senior secured notes offering through its subsidiaries, HFC Prestige Products and HFC Prestige International U.S. The notes, subject to market conditions, will be secured by first priority liens on the same collateral as Coty's existing senior secured credit facilities and notes, and will be guaranteed by Coty's other subsidiaries. Upon achieving investment grade ratings from two out of three ratings agencies, the collateral will be released. The proceeds will be used to redeem Coty's existing 6.500% Senior Notes due 2026, repay parts of its revolving credit facility borrowings, and cover offering expenses. The notes and guarantees will be offered under Rule 144A and Regulation S, not registered under the Securities Act of 1933.
- Launch of €500 million senior secured notes indicates robust financial maneuvering.
- Intended use of proceeds to redeem higher interest 6.500% Senior Notes due 2026, likely reducing interest expenses.
- Repayment of revolving credit facility borrowings can improve liquidity position.
- Collateral release conditioned on investment-grade ratings could enhance financial flexibility.
- Reliance on market conditions introduces uncertainty in the offering's success.
- Existing debt obligations necessitating the issuance of new notes may indicate leverage concerns.
- Not registered under the Securities Act, limiting potential investor base.
- Potential risks if investment-grade ratings are not achieved, affecting collateral security.
Insights
Coty Inc.'s decision to launch a €500 million offering of senior secured notes offers several insights into the company’s financial strategy and standing.
From a financial perspective, the primary aim of this offering is to manage and refinance existing debt effectively. The company plans to use the proceeds to redeem its existing 6.500% Senior Notes due 2026. This is a strategic move as the new notes could potentially carry a lower interest rate, thus reducing overall interest expenses. Additionally, part of the proceeds will be used to repay a portion of borrowings under Coty's revolving credit facility, which provides more financial flexibility. Over time, this could strengthen Coty's liquidity position while optimizing its capital structure.
It's noteworthy that the collateral security on the notes will be released if the notes achieve investment-grade ratings from two out of the three rating agencies. This is a significant indicator of Coty's confidence in its ability to improve or maintain its credit rating, which could further reduce borrowing costs.
For retail investors, understanding the implications of debt refinancing is crucial. Lower interest expenses can improve net profit margins and free up capital for other strategic initiatives. However, it’s also essential to monitor how the market conditions will affect the interest rates of the new notes at the time of pricing.
Coty's plan to use the new notes to refinance existing debt underscores its proactive approach to managing its credit profile. The existing 6.500% Senior Notes due 2026 are relatively high-cost debt and replacing them could improve the company's overall cost of capital.
Coty's intention to secure investment-grade ratings for these new notes is a key point to consider. Achieving such ratings would signal the company's improved creditworthiness and stability. For investors, investment-grade ratings generally imply lower risk, which could make these notes more attractive compared to high-yield counterparts.
However, it’s essential to remain cautious about the specific terms of the new notes, including the interest rate at the time of pricing and the company's ability to maintain or improve its credit ratings amid market fluctuations. Also, note that the release of collateral depends on achieving these high ratings, adding an element of uncertainty.
Overall, while this move reflects a sound refinancing strategy, investors should stay alert to the broader economic conditions that might impact Coty’s credit rating trajectory.
This debt offering reveals a lot about Coty's position in the market and its strategic priorities. The focus on debt management suggests that the company is looking to stabilize its financials amidst a competitive and evolving beauty market. By refinancing at potentially lower interest rates, Coty can free up resources that could be redirected towards growth initiatives, such as marketing, R&D, or even acquisitions.
Investors should consider the broader market dynamics, particularly how the beauty industry is performing and Coty's relative positioning within it. Any improvement in financial stability resulting from this refinancing could enhance Coty's ability to compete more aggressively in its core sectors, such as fragrances and skincare.
Additionally, the move to secure and potentially release collateral based on credit ratings indicates a forward-looking approach to financial health. This could instill confidence in both equity and debt investors regarding the company's long-term prospects.
While refinancing is generally seen as a positive move, it’s critical to keep an eye on how effectively Coty deploys any freed-up capital to drive growth and maintain market share.
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 that it, together with its wholly-owned subsidiaries, HFC Prestige Products, Inc. and HFC Prestige International
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
What is the purpose of Coty issuing senior secured notes?
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