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26 June 2019 by jbchevrel

Avon Products Inc (AVP) manufactures and sells beauty and related products (fragrances, cosmetics, personal care, fashion and home). This single-B rated name is present in the CDX HY since s24 included, after spending s21 to s23 in IG. Today the 5y CDS of AVP is among the worst-performing names in CDX HY s32, wider by c50bp, thus back to high 320s mid. We are getting back to the levels last seen in May. For reference, on May 22nd, AVP had announced that it had agreed to be acquired by Natura, expected to close in early 2020. Despite anti-trust potential hurdles, the market seems to be expecting a deal, in both stock and CDS. Overnight, AVP announced that Avon International Capital p.l.c. (100%-owned subsidiary) priced an offering of $400M of 6.5 22s (secured) guaranteed by AVP. The deal got upsized from $350M to $400M. That at a yield of mid-6s, so spread in 470s. According to their statement, AVP intends to use the proceeds from the offering of 22s to refinance its existing 20s. For now, AVP has around $2B of debt, all in USD, with around one fifth expiring 2020 (unsecured) and around half expiring 2022 (split between secured and 1L). The short end of the CDS curve steepened a good deal, around 25bp in 1s5s and 2s5s.