Monday 14 August 2017 by Facilitation Trade opportunities

Ding dong, Avon calling

Last week we announced a new high yield USD DirectBond by global cosmetics company, Avon

avonlipstick

Ding Dong…..Avon calling. Many of you will remember some of the iconic ads which had many a housewife enjoying purchasing beauty and fashion in the comfort of their own home.

No doubt you have been contacted by your very friendly neighbour or ‘direct selling representative’ for a coffee catch up at some stage – there are over 6 million representatives worldwide!

Times are changing and Avon is as well, identifying that it needs to appeal to younger millennials.  

About Avon

Avon is a global manufacturer and marketer of beauty and related products that commenced operations in 1886 in New York, but since January 2017, is headquartered in London. Avon is the leading direct selling beauty company in the world by sales.

The Avon brand ranks within the top five global brands in the beauty and personal care category and has 90% brand recognition in most major markets.

Think skincare, fragrance, jewellery, gifts, homewares and nutritional products.

The company is transitioning away from its traditional sales and marketing approach, with management identifying a greater need to reposition its products to appeal to millennials. They have set out a three year plan to cut costs and improve sales through new campaigns and greater focus on social media and brand promoters through avenues like Instagram and Facebook.

Summary financials

Avon recently reduced balance sheet debt, and leverage is improving.

Last 12 months financials to 30 June 2017:

  • Revenue: USD5.7bn
  • Adjusted EBITDA: USD435.0m
  • Net interest expense: USD127.6m
  • Total assets: USD3.2bn
  • Cash: USD460.9m
  • Debt: USD2.0bn
  • Net debt/Adjusted EBITDA: 4.4x 
  • Adjusted EBITDA/Net interest: 3.4x

About Avon bonds

We have DirectBonded the Avon 7.875% August 2022 senior secured, fixed rate bond, rated BB- by Standard and Poor’s. S&P recently revised the outlook from stable to positive.

The bond is callable with a “yield to worst” to the August 2020 of 5.78%. The yield to maturity is shown below at 6.14%.

Call dates:
15 August 2019 @ 103.938 (Yield to Worst: 5.79%)
15 August 2020 @ 101.969 (YTW: 5.77%)
15 August 2021 and thereafter @ 100.000 (YTW: 5.79%)

Highlights of the opportunity:

  • Senior secured position
  • High rate of recovery in event of default 90 – 100%
  • Household name and global manufacturer
  • Opportunity to add sector diversification to portfolio

Available in minimum USD10,000 parcels.

Here is a link to the factsheet which provides a more detailed summary.

As at 14 August 2017, the minimum face value parcel costs USD10,719.38 or AUD13,651.30 assuming foreign currency exchange is at 0.7852. 

Trade details Client buys from FIIG
ISIN USU05485AA20
Issuer
Avon International Opera
Security type Fixed coupon bond
Coupon
7.875%
Maturity 
15 August 2022
Capital structure
Senior secured debt
Rating
BB- 
Settlement
11 August 2017
Face value
10,000
Yield
6.19%
Running yield
7.35%
Capital price
107.050
Gross price
107.194
Consideration 
10,719.38
Price accurate as at 14 August 2017 but subject to change. 

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