Moody's Investors Service has revised its outlook on Revlon Consumer Products from negative to developing following the company's announcement last month that its board of directors authorized management to begin exploring various alternatives to strengthen its balance sheet and increase equity. Those alternatives could include the issuance of debt or equity for cash in exchange for Revlon debt. The shift in outlook recognizes uncertainty regarding the timing, form, magnitude, terms and execution of any potential capital restructuring. The rating also reflects uncertainty regarding the company's long-term capital structure and recovery prospects for its various debt classes. Revlon has $250 million senior secured bank credit facilities due 2005 rated B3 by Moody's.
Revlon's credit profile continues to be challenged by its participation in a highly competitive and fashion-sensitive industry with well-resourced competitors. The company faces material debt service obligations and the added risks of a debt-financed growth strategy, Moody's notes. Still, the ratings are supported by the strong market recognition of the Revlon brand name and the underpinning to enterprise value that this brand power provides, Moody's adds. "Revlon believes that this action by Moody's is consistent with the significant progress the company has made in strengthening the fundamentals of its business, particularly its brands, its relationships with its retailers and its organizational capabilities," a company spokesperson said.
Revlon has also received board approval for an additional $125 million of unsecured term loans provided by MacAndrews & Forbes Holdings with similar terms to the $100 million line MacAndrews & Forbes extended to Revlon in early 2003. The new loan has an interest rate of 12% per annum, with no interest payable until final maturity on Dec. 1, 2005. Ronald Perelman owns 83% of Revlon through MacAndrews & Forbes.
* Standard & Poor's raised its rating on Spring PCS affiliate Alamosa Holdings' senior secured credit facility from CC to CCC+. The rating was removed from watch, where it was placed in November upon completion of a discounted debt exchange offer by wholly owned subsidiary Alamosa Delaware. That offering eliminated about $240 million in debt.
Alamosa has shown steady operating improvement and cash flow growth during 2003 following a period of high involuntary churn from subprime customers that the company experienced in 2002, S&P notes. For the 12 months ended Sept. 30, 2003, pro forma total debt to EBITDA was about seven times, adjusted for operating leases. The outlook is developing.