Debt and Other Financing

Debt

Debt at December 31 consisted of the following:



	2011			2010
Debt maturing within one year:
Notes payable	$	832.4		$	214.1
Current portion of long-term debt	16.9			513.5
Total	$	849.3		$	727.6
Long-term debt:
5.125% Notes, due January 2011	$	—		$	500.0
4.80% Notes, due March 2013	249.9			249.8
4.625% Notes, due May 2013	121.3			118.7
5.625% Notes, due March 2014	498.8			498.3
Other, payable through 2015 with interest from .93% to 12.6%	77.5			80.7
2.60% Senior Notes, Series A, due November 2015	142.0			142.0
5.75% Notes, due March 2018	249.5			249.4
4.20% Notes, due July 2018	249.5			249.4
6.50% Notes, due March 2019	346.9			346.4
4.03% Senior Notes, Series B, due November 2020	290.0			290.0
4.18% Senior Notes, Series C, due November 2022	103.0			103.0
Total long-term debt	2,328.4			2,827.7
Adjustments for debt with fair value hedges	147.6			94.4
Less current portion	(16.9		)	(513.5		)
Total	$	2,459.1		$	2,408.6

Notes payable included short-term borrowings of international subsidiaries at average annual interest rates of approximately 10.9% at December 31, 2011, and 5.6% at December 31, 2010. Total notes payable include $17.4 of bank overdrafts at December 31, 2011, and $58.2 at December 31, 2010.

Other long-term debt, payable through 2015, included obligations under capital leases of $19.0 at December 31, 2011, and $15.2 at December 31, 2010, which primarily relate to leases of automobiles and equipment. In addition, other long-term debt, payable through 2015, at December 31, 2011 and 2010, included financing lease obligations entered into in 2009 for $58.5 and $65.5, respectively, which primarily relates to the sale and leaseback of equipment and software in one of our distribution facilities in North America.

Adjustments for debt with fair value hedges include adjustments to reflect net unrealized gains of $147.6 and $94.4 at December 31, 2011, and 2010, respectively. See Note 8, Financial Instruments and Risk Management.

We held interest-rate swap contracts that swap approximately 74% at December 31, 2011 and 2010, of our long-term debt to variable rates. See Note 8, Financial Instruments and Risk Management.

On November 23, 2010, the Company sold and issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $142.0 in aggregate principal amount of Senior Notes, Series A (the “Series A Notes”), $290.0 in aggregate principal amount of the Senior Notes, Series B (the “Series B Notes”) and $103.0 in aggregate principal amount of the Senior Notes, Series C (the ‘Series C Notes” and collectively with the Series A Notes and Series B Notes, the “Notes”). The Series A Notes bear interest at the rate of 2.60% per annum, payable semi-annually, and will mature on November 23, 2015. The Series B Notes bear interest at the rate of 4.03% per annum, payable semi-annually, and will mature on November 23, 2020. The Series C Notes bear interest at the rate of 4.18% per annum, payable semi-annually, and will mature on November 23, 2022. The Notes are senior unsecured obligations of the Company, rank equal in right of payment with all other senior unsecured indebtedness of the Company, and are unconditionally guaranteed by one of the Company’s wholly-owned subsidiaries. The Notes contain certain covenants that have the effect of limiting, under certain circumstances, the ability of the Company and certain of its subsidiaries to, among other things, merge with other entities, create new liens, incur additional indebtedness or substantially change the general nature of the business of the Company and its subsidiaries, taken as a whole. The Notes also require the Company to comply with an interest coverage ratio (determined in relation to our consolidated pretax income and interest expense) to equal or exceed 4:1 and contain customary default provisions, including cross-default provisions. The proceeds from the sale of the Notes were used to repay existing debt and for general corporate purposes.

In March 2009, we issued $850.0 principal amount of notes payable in a public offering. $500.0 of the notes bear interest at a per annum coupon rate equal to 5.625%, payable semi-annually, and mature on March 1, 2014 (the “2014 Notes”). $350.0 of the notes bear interest at a per annum coupon rate equal to 6.50%, payable semi-annually, and mature on March 1, 2019 (the “2019 Notes”). The net proceeds from the offering of $837.6 were used to repay the outstanding indebtedness under our commercial paper program and for general corporate purposes. The carrying value of the 2014 Notes represents the $500.0 principal amount, net of the unamortized discount to face value of $1.2 at December 31, 2011, and $1.7 at December 31, 2010. The carrying value of the 2019 Notes represents the $350.0 principal amount, net of the unamortized discount to face value of $3.1 at December 31, 2011, and $3.6 at December 31, 2010.

In March 2008, we issued $500.0 principal amount of notes payable in a public offering. $250.0 of the notes bear interest at a per annum coupon rate equal to 4.80%, payable semi-annually, and mature on March 1, 2013, (the “2013 Notes”). $250.0 of the notes bear interest at a per annum coupon rate of 5.75%, payable semi-annually, and mature on March 1, 2018 (the “2018 Notes”). The net proceeds from the offering of $496.3 were used to repay outstanding indebtedness under our commercial paper program and for general corporate purposes. The carrying value of the 2013 Notes represents the $250.0 principal amount, net of the unamortized discount to face value of $.1 at December 31, 2011, and $.2 at December 31, 2010. The carrying value of the 2018 Notes represents the $250.0 principal amount, net of the unamortized discount to face value of $.5 at December 31, 2011, and $.6 at December 31, 2010.

In January 2006, we issued in a public offering $500.0 principal amount of notes payable (the “5.125% Notes”) that matured on January 15, 2011, and bore interest, payable semi-annually, at a per annum rate equal to 5.125%. The net proceeds from the offering were used for general corporate purposes, including the repayment of short-term domestic debt. At December 31, 2010, the carrying value of the 5.125% Notes represented the $500.0 principal amount. The 5.125% Notes were paid in January 2011.

In June 2003, we issued to the public $250.0 principal amount of registered senior notes (the “4.20% Notes”). The 4.20% Notes mature on July 15, 2018, and bear interest at a per annum rate of 4.20%, payable semi-annually. The carrying value of the 4.20% Notes represents the $250.0 principal amount, net of the unamortized discount to face value of $.5 and $.6 at December 31, 2011 and 2010, respectively.

In April 2003, the call holder of $100.0 principal amount of 6.25% Notes due May 2018 (the “Notes”), embedded with put and call option features, exercised the call option associated with these Notes, and thus became the sole note holder of the Notes. Pursuant to an agreement with the sole note holder, we modified these Notes into $125.0 aggregate principal amount of 4.625% notes due May 15, 2013. The modified principal amount represented the original value of the putable/callable notes, plus the market value of the related call option and approximately $4.0 principal amount of additional notes issued for cash. In May 2003, $125.0 principal amount of registered senior notes were issued in exchange for the modified notes held by the sole note holder. No cash proceeds were received by us. The registered senior Notes mature on May 15, 2013, and bear interest at a per annum rate of 4.625%, payable semi-annually (the “4.625% Notes”). The transaction was accounted for as an exchange of debt instruments and, accordingly, the premium related to the original notes is being amortized over the life of the new 4.625% Notes. The carrying value of the 4.625% Notes represents the $125.0 principal amount, net of the unamortized discount to face value and the premium related to the call option associated with the original notes totaling $3.7 at December 31, 2011, and $6.3 at December 31, 2010.

The indentures and note purchase agreement under which the above notes were issued contain certain covenants, including limits on the incurrence of liens and restrictions on the incurrence of sale/leaseback transactions and transactions involving a merger, consolidation or sale of substantially all of our assets. At December 31, 2011, we were in compliance with all covenants in our indentures and note purchase agreement. Such indentures and note purchase agreement do not contain any rating downgrade triggers that would accelerate the maturity of our debt. However, we would be required to make an offer to repurchase the 2013 Notes, 2014 Notes, 2018 Notes, 2019 Notes, the Series A Notes, the Series B Notes and the Series C Notes at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest in the event of a change in control involving Avon and a corresponding ratings downgrade to below investment grade.

Annual maturities of long-term debt (including unamortized discounts and premiums and excluding the adjustments for debt with fair value hedges) outstanding at December 31, 2011, are as follows:



	2012		2013		2014		2015		2016		After 2017		Total
Maturities	$	16.9	$	384.8	$	509.1	$	148.5	$	5.9	$	1,272.3	$	2,337.5

Other Financing

We maintain a three-year, $1 billion revolving credit and competitive advance facility ("Credit Facility"), which expires in November 2013. The interest rate on borrowings under this credit facility is based on LIBOR plus the appropriate margin reflecting our credit default swap rate with a minimum and maximum based on our credit rating (the “CDS Spread”). The Credit Facility also allows for borrowing at an interest rate based on the CDS Spread minus 1%, but not less than 0% per annum, plus the highest of prime, .5% plus the federal funds rate, or 1% plus one month LIBOR. The Credit Facility has an annual fee of $1.7, payable quarterly, based on our current credit ratings. The Credit Facility contains various covenants, including a financial covenant that requires our interest coverage ratio (determined in relation to our consolidated pretax income and interest expense) to equal or exceed 4:1. The Credit Facility also provides for possible increases by up to an aggregate incremental principal amount of $250.0, subject to the consent of the affected lenders under the Credit Facility. The Credit Facility may be used for general corporate purposes. There were no amounts outstanding under the Credit Facility at December 31, 2011, or December 31, 2010.

We maintain a $1 billion commercial paper program. Under the program, we may issue from time to time unsecured promissory notes in the commercial paper market in private placements exempt from registration under federal and state securities laws, for a cumulative face amount not to exceed $1 billion outstanding at any one time and with maturities not exceeding 270 days from the date of issue. The commercial paper short-term notes issued under the program are not redeemable prior to maturity and are not subject to voluntary prepayment. The commercial paper program is supported by our three-year $1 billion revolving credit and competitive advance facility. Outstanding commercial paper effectively reduces the amount available for borrowing under this credit facility. At December 31, 2011, there was $709.0 outstanding under the commercial paper program.

At December 31, 2011 and December 31, 2010, we also had letters of credit outstanding totaling $23.4 and $16.4, respectively, which primarily guarantee various insurance activities. In addition, we had outstanding letters of credit for trade activities and commercial commitments executed in the ordinary course of business, such as purchase orders for normal replenishment of inventory levels.