Mary Kay's corporate credit and senior secured credit rating was raised from BB- to BB by Standard & Poor's on account of the cosmetics firm's improved operating performance and financial profile. The Dallas-based company has reduced debt and increased revenues through consistently increasing the number of active sales consultants over the past few years, S&P states. Productivity per each consultant also improved in 2002 after years of decline. This indicates an improved product mix and successful sales initiatives, S&P notes.
The company's above average credit protection measures support S&P's rating despite Mary Kay's below-average business risk profile caused by its direct sales business model, S&P says. Privately-held Mary Kay currently has $420 million in bank debt led by Credit Suisse First Boston. However, S&P still notes that Mary Kay relies on the mature and competitive U.S. cosmetics market and still has industry risk related to direct-sales distribution. Terry Smith, cfo of Mary Kay, did not return calls and a spokesman declined to comment.
* S&P also raised The Houston Exploration Company's credit ratings from BB- to BB. This is based on the natural gas and oil company's demonstrated ability to improve its capital structure and produce strong cash flow credit protection measures, according to S&P. Solid commodity prices have enabled Houston Exploration to use free cash flow to reduce debt and improve liquidity, S&P adds. Also, the rating reflects the company's modest financial leverage, competitive operating costs and a hedging program that mitigates the risks related to Houston Exploration's aggressive capital spending budget, S&P notes. The debt-to-capital ratio is about 25%. But the ratings still reflect the company's relatively small reserve base, the large capital program necessary to maintain production levels and the rapid production decline profile. John Karnes, senior v.p. and cfo of Houston Exploration, said the company's business model takes this into account.
|Other Ratings Actions*|
|Mirant Americas Generation||CCC||Downgraded from B||S&P|
|Northrop Grumman Corp.||BBB-||Revised to Positive from Stable||Fitch|
|The Williams Companies||B3||Upgraded from Caa1||Moody's|
|*Thurs, May 29 through Wed, June 4|