Coty launches private offering of senior notes to refinance debt

NEW YORK - Beauty company Coty Inc. (NYSE:COTY) (Paris:COTY), currently trading at $3.97 and carrying a total debt of $4.2 billion, announced Thursday it has launched a private offering of senior notes, with terms to be determined at pricing. According to InvestingPro data, the company’s current ratio of 0.77 indicates some pressure on short-term liquidity.

The notes will initially be senior unsecured obligations of Coty and its wholly-owned subsidiaries, HFC Prestige Products, Inc. and HFC Prestige International U.S. LLC, according to a press release statement. The notes will maintain this status as long as they hold investment grade ratings from at least two of three ratings agencies.

If the notes lose these investment grade ratings, they will become fully guaranteed on a senior secured basis by Coty’s subsidiaries and secured by first-priority liens on collateral that currently secures the company’s existing senior secured credit facilities and notes.

Coty plans to use proceeds from the offering, along with cash on hand, to redeem all of its outstanding 5.000% senior secured notes due 2026 and a portion of its 3.875% senior secured notes due 2026, both at par plus accrued interest.

The notes are being offered only to qualified institutional buyers under Rule 144A of the Securities Act and to non-U.S. persons outside the United States under Regulation S. The securities have not been registered under the Securities Act or state securities laws.

Coty, founded in Paris in 1904, sells prestige and mass market beauty products across fragrance, color cosmetics, and skin and body care categories in over 120 countries and territories. While currently operating at impressive gross profit margins of 65%, InvestingPro analysis indicates the company is undervalued despite recent challenges, with analysts projecting a return to profitability this year. For deeper insights into Coty’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Coty Inc. reported earnings for the fourth quarter that missed expectations, with an earnings per share of -5 cents compared to the anticipated +1 cent. The company experienced a 9% decline in like-for-like sales year-over-year, with its Prestige segment sales down 7% and Consumer Beauty sales falling 12%. Analysts have responded to these results with several adjustments to Coty’s stock ratings and price targets. Berenberg downgraded the stock from Buy to Hold, citing concerns about delayed sales growth recovery and reduced management guidance. Similarly, TD Cowen and Wells Fargo both lowered their price targets to $4, maintaining Hold and Equal Weight ratings, respectively, due to inventory destocking and valuation concerns. Goldman Sachs also adjusted its price target to $4.50, noting mixed results in the fourth quarter. Additionally, S&P Global revised its outlook on Coty to negative, highlighting rising leverage as a concern. These developments reflect ongoing challenges for Coty amid macroeconomic pressures and company-specific issues.

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