Herbalife Announces Pricing of Upsized $800 Million Aggregate Principal Amount of Senior Secured Notes Offering

Rhea-AI Summary

Herbalife (HLF) announces the upsizing and pricing of $800 million senior secured notes due 2029, with a fixed annual interest rate of 12.25%. The company plans to use the proceeds to repay debt and for general corporate purposes.

Insights

Financial Analyst

Herbalife's decision to upsize its senior secured notes offering from $700 million to $800 million at a fixed interest rate of 12.25% is a strategic move to restructure its debt profile. The high interest rate indicates a premium the company is paying, likely reflecting a risk premium demanded by investors. This could suggest that the market perceives higher risk associated with Herbalife's creditworthiness. However, by repaying existing debts, including those with a higher interest rate, Herbalife could improve its interest expense outlook and potentially its credit rating over time.

The use of proceeds to pay down existing senior secured credit facility borrowings and 7.875% Senior Notes due 2025 before maturity could reduce near-term liquidity risks. This proactive approach to managing debt maturities may reassure investors about the company's financial prudence. However, investors should be aware of the potential dilution of earnings due to increased interest expenses in the short term, before the long-term benefits of the refinancing are realized.

Debt Market Analyst

The pricing of the notes at 97.298% of par reflects a discount, which is not uncommon in the debt market, especially for offerings of this size and nature. The discount compensates investors for the immediate mark-to-market risk. The closing date set for April 12, 2024, provides a clear timeline for market participants to assess Herbalife's liquidity and capital structure strategy.

The guarantee by the company and its subsidiaries ensures that the obligations are backed by a broader asset base, which could be seen as a confidence measure for debt holders. However, the emphasis on the securities not being registered under the Securities Act and only being offered under specific exemptions like Rule 144A and Regulation S means that the offering is targeted at qualified institutional buyers and certain non-U.S. persons, limiting the investor base.

Market Research Analyst

Herbalife's approach to debt refinancing amidst the current economic climate reflects a strategic maneuver to align its capital structure with its operational needs. The high interest rate may be interpreted as a response to the prevailing interest rate environment and the company's specific risk profile. The timing of the offering and the use of proceeds for general corporate purposes alongside debt repayment could indicate that Herbalife is also aiming to maintain a cushion for strategic initiatives or unforeseen expenses.

Investors should monitor the company's leverage and interest coverage ratios post-transaction to assess the impact of this capital restructuring on its financial health. While the upsizing provides Herbalife with additional capital, it also increases the company's debt burden, which could affect future financial flexibility.

LOS ANGELES--(BUSINESS WIRE)-- Herbalife Ltd. (NYSE: HLF) (the “Company”), a global health and wellness company, today announced the upsizing and pricing of the previously announced offering by HLF Financing SaRL, LLC and Herbalife International, Inc., each a wholly owned subsidiary of the Company, of $800 million aggregate principal amount of senior secured notes due 2029 (the “Notes”) at a price to the public of 97.298% of par. The aggregate principal amount of the Notes to be issued in the offering was increased to $800 million from the previously announced amount of $700 million.

The Notes have a fixed annual interest rate of 12.25%, which will be paid semi-annually on April 15 and October 15 of each year, commencing on October 15, 2024. The Notes will be guaranteed on a senior secured basis by each of the Company and the Company’s existing and future subsidiaries that is a guarantor of the obligations of any domestic borrower under the Company’s senior secured credit facility.

The Company expects to use the net proceeds from the offering to repay indebtedness, including borrowings outstanding under the Company’s senior secured credit facility and a portion of the Company’s 7.875% Senior Notes due 2025, to pay related fees and expenses and the remainder for general corporate purposes.

The offering is expected to close on April 12, 2024, subject to customary closing conditions.

This press release is neither an offer to sell nor a solicitation of an offer to buy the Notes, nor shall there be any sale of the Notes in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction. Any offer, if at all, will be made only pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in reliance on Regulation S under the Securities Act. The Notes have not been and are not expected to be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

About Herbalife Ltd.

Herbalife (NYSE: HLF) is a premier health and wellness company, community and platform that has been changing people's lives with great nutrition products and a business opportunity for its independent distributors since 1980. The Company offers science-backed products to consumers in more than 90 markets through entrepreneurial distributors who provide one-on-one coaching and a supportive community that inspires their customers to embrace a healthier, more active lifestyle to live their best life.

Forward-Looking Statements

This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management, including for future operations, capital expenditures, or share repurchases; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief or expectation; and any statements of assumptions underlying any of the foregoing or other future events. Forward-looking statements may include, among others, the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “anticipate” or any other similar words.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results or outcomes could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, many of which are beyond our control. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in or implied by our forward-looking statements include the following:

• the potential impacts of current global economic conditions, including inflation, on us; our Members, customers, and supply chain; and the world economy;
• our ability to attract and retain Members;
• our relationship with, and our ability to influence the actions of, our Members;
• our noncompliance with, or improper action by our employees or Members in violation of, applicable U.S. and foreign laws, rules, and regulations;
• adverse publicity associated with our Company or the direct-selling industry, including our ability to comfort the marketplace and regulators regarding our compliance with applicable laws;
• changing consumer preferences and demands and evolving industry standards, including with respect to climate change, sustainability, and other environmental, social, and governance, or ESG, matters;
• the competitive nature of our business and industry;
• legal and regulatory matters, including regulatory actions concerning, or legal challenges to, our products or network marketing program and product liability claims;
• the Consent Order entered into with the FTC, the effects thereof and any failure to comply therewith;
• risks associated with operating internationally and in China;
• our ability to execute our growth and other strategic initiatives, including implementation of our restructuring initiatives, and increased penetration of our existing markets;
• any material disruption to our business caused by natural disasters, other catastrophic events, acts of war or terrorism, including the war in Ukraine, cybersecurity incidents, pandemics, and/or other acts by third parties;
• our ability to adequately source ingredients, packaging materials, and other raw materials and manufacture and distribute our products;
• our reliance on our information technology infrastructure;
• noncompliance by us or our Members with any privacy laws, rules, or regulations or any security breach involving the misappropriation, loss, or other unauthorized use or disclosure of confidential information;
• contractual limitations on our ability to expand or change our direct-selling business model;
• the sufficiency of our trademarks and other intellectual property;
• product concentration;
• our reliance upon, or the loss or departure of any member of, our senior management team;
• restrictions imposed by covenants in the agreements governing our indebtedness;
• risks related to our convertible notes;
• changes in, and uncertainties relating to, the application of transfer pricing, income tax, customs duties, value added taxes, and other tax laws, treaties, and regulations, or their interpretation;
• our incorporation under the laws of the Cayman Islands; and
• share price volatility related to, among other things, speculative trading and certain traders shorting our common shares.

Additional factors and uncertainties that could cause actual results or outcomes to differ materially from our forward-looking statements are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 14, 2024, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Consolidated Financial Statements and the related Notes included therein. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

Forward-looking statements made in this release speak only as of the date hereof. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240405729211/en/

Media Contact:

Thien Ho

Vice President, Global Corporate Communications

thienh@herbalife.com



Investor Contact:

Erin Banyas

Vice President, Head of Investor Relations

erinba@herbalife.com

Source: Herbalife Ltd.

FAQ

What did Herbalife (HLF) announce regarding senior secured notes?

Herbalife (HLF) announced the upsizing and pricing of $800 million senior secured notes due 2029.

What is the fixed annual interest rate on the senior secured notes?

The senior secured notes have a fixed annual interest rate of 12.25%.

How will Herbalife (HLF) utilize the net proceeds from the offering?

Herbalife (HLF) plans to use the net proceeds to repay debt, including borrowings outstanding under the senior secured credit facility, and for general corporate purposes.

When is the expected closing date for the offering?

The offering is expected to close on April 12, 2024, subject to customary closing conditions.

What are the guarantees associated with the senior secured notes?

The senior secured notes will be guaranteed on a senior secured basis by Herbalife (HLF) and the company’s existing and future subsidiaries that are guarantors of the obligations of any domestic borrower under the senior secured credit facility.