Debt and Other Financing

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt and Other Financing

Debt and Other Financing

Debt

Debt at December 31 consisted of the following:

	2022		2021
Debt maturing within one year:
Short term debt	$	5.7	$	32.6
Loans from affiliates of Natura &Co	537.2		371.7
Total	$	542.9	$	404.3
Long-term debt:
Finance lease liabilities	0.8		1.3
5.00% Notes, due March 2023	—		460.8
6.95% Notes, due March 2043	214.0		213.9
Loans from affiliates of Natura &Co, due 2028 and 2029	1,427.2		736.3
Total	1,642.0		1,412.3

The carrying value of long-term debt is presented net of debt issuance costs and includes any related discount or premium, as applicable.

Unsecured Notes

In March 2013, we issued, in a public offering, $500.0 principal amount of 5.00% Notes due March 15, 2023 (the "5.00% Notes") and $250.0 principal amount of 6.95% Notes due March 15, 2043 (the "6.95% Notes") (collectively, the "2013 Notes"). Interest on the 2013 Notes is payable semi-annually on March 15 and September 15 of each year.

The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the credit ratings assigned to the 2013 Notes with S&P and Moody's. As described in the indenture, the interest rates on the 2013 Notes increase or decrease by .25% for each one-notch movement below investment grade on each of the credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes.

In the fourth quarter of 2016, we repurchased $11.1 of our 5.00% Notes and $6.2 of our 6.95% Notes and in the fourth quarter of 2018, we repurchased $27.0 of our 5.00% Notes.

In September 2020, we repurchased $27.8 of our 6.95% Notes due March 15, 2043. The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $3.8 and accrued interest of $1.2. In connection with the repurchase, we incurred a loss on extinguishment of debt of $4.1 before tax in the third quarter of 2020 consisting of the $3.8 premium paid for the repurchases, and $.3 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

In May 2022, we repurchased $461.9 of our 5% Notes due 15 March, 2023, financed by long-term related party loans (see below). The aggregate repurchase price was equal to the principal amount of the notes, plus a premium of $15.0 and accrued interest of $5.4. In connection with the repurchase, we incurred a loss on extinguishment of debt of $15.7 before tax in the second quarter of 2022 consisting of the $15.0 premium paid for the repurchase and $.7 for the write-off of debt issuance costs and discounts related to the initial issuance of the notes that were repurchased.

At December 31, 2022 and 2021, the carrying values of our unsecured notes were comprised of the following:

	2022				2021
	Remaining Principal	Unamortized Discounts	Unamortized Debt Issuance Costs	Total	Remaining Principal	Unamortized Discounts	Unamortized Debt Issuance Costs	Total
5.00% Notes, due March 2023	—	—	—	—	461.9	(.5)	(.6)	460.8
6.95% Notes, due March 2043	216.1	(1.6)	(.5)	214.0	216.1	(1.7)	(.5)	213.9

The indentures governing our outstanding notes described above contain certain customary covenants, customary events of default, cross-default provisions and change in control provisions. In July and September 2019, bondholder consents for the 5% Notes and the 6.95% Notes, respectively, were obtained to amend the definition of "change of control" to permit the acquisition of Avon by Natura. No repayment of notes was triggered by the Transaction with Natura &Co.

At December 31, 2022 and 2021, we had recorded accrued interest on our unsecured notes of $5.8 and $14.7, respectively, which is classified within other accrued liabilities in our Consolidated Balance Sheets.

Senior Secured Notes

In August 2016, Avon International Operations, Inc. ("AIO"), a wholly-owned subsidiary of the Company, issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $500.0 in aggregate principal amount of 7.875% Senior Secured Notes, with a maturity date of August 15, 2022 (the "2016 Notes").

In July 2019, Avon International Capital, p.l.c. ("AIC"), a wholly-owned subsidiary of the Company, issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $400.0 in aggregate principal amount of 6.5% Senior Secured Notes, with a maturity date August 15, 2022 (the "2019 Notes").

In November 2020, in connection with the Natura & Co Promissory Note, we redeemed the outstanding principal amount of our 2016 Notes due August 15, 2022 and the outstanding principal amount of our 2019 Notes due August 15, 2022. With respect to the 2016 Notes, the aggregate redemption amount paid was equal to the outstanding principal amount of $500, plus a premium of $9.8 and accrued interest of $8.4. With respect to the 2019 Notes, the aggregate redemption amount paid was equal to the outstanding principal amount of $400, plus a premium of $7.9 and accrued interest of $5.6.

In connection with the redemption, we incurred a loss on extinguishment of debt of $25.6 before tax in the fourth quarter of 2020 consisting of the $17.7 premiums, and the write-off of $7.9 of debt issuance costs related to the initial issuances of the notes that were redeemed.

Certain hedging and cash management obligations of the Company and certain subsidiaries are secured by first priority security interests in substantially all of its assets, subject to certain exceptions.

At December 31, 2022 and 2021, the carrying values of our senior secured notes was nil.

Maturities of Long-Term Debt

Annual maturities of long-term debt, which includes our notes, loans from affiliates of Natura &Co and capital leases outstanding at December 31, 2022, are as follows:

	2023		2024		2025		2026		2027		2028 and Beyond		Total
Maturities	$	—	$	.5	$	.3	$	.2	$	—	$	1,643.3	$	1,644.3

Other Financing

Natura Revolving Credit Facility

In May 2020, the Company’s subsidiary, Avon Luxembourg entered into a Revolving Credit Facility Agreement with Natura &Co International S.à r.l., a subsidiary of Natura &Co Holding and an affiliate of the Company, in the initial amount of $100, increased to $250 in March 2021, which may be used for working capital and other general corporate purposes (the "Facility"). Borrowings under the Facility bear interest at a rate per annum of LIBOR plus a margin determined on an arm's length basis, and the Facility is to mature on May 31, 2022. On July 1, 2021, the Company sold Avon Luxembourg to a subsidiary of Natura &Co Holding and the Company no longer has access to this facility.

On November 7, 2022, the Company’s subsidiary, Avon Cosmetics Limited entered into a two-year committed intercompany multi-currency revolving credit facility with Natura &Co Luxembourg Holdings S.à r.l, a subsidiary of Natura &Co Holding and an affiliate of the Company, in the amount of $300, of which $226 was drawn down at December 31, 2022. Borrowings

under this facility will be used to reduce short-term financing from third-party banks and will bear interest at a rate per annum of 3% plus applicable currency benchmark rate.

Related Party loans

In November 2020, AIO entered into a Promissory Note with a subsidiary of Natura &Co Holding S.A. and an affiliate of the Company in the amount of $960. The Promissory Note bears interest at a rate per annum of 3.13% with a maturity date of November 2, 2022 (“the Natura &Co Loan”). On July 1, 2021, as part of the sale of Avon Luxembourg to a subsidiary of Natura &Co Holding the $960 loan was partially repaid with the proceeds from a loan maturing in 2028. The loan was fully repaid in the second of quarter of 2022 as part of a refinancing and the subsequent repurchase of Unsecured Notes (see above). As at December 31, 2022, $692 was outstanding under the loan maturing in 2028 which is between Avon Beauty Limited, and Natura &Co Luxembourg Holdings S.à r.l. ("Natura &Co Lux Loan"). Avon Beauty Limited is a subsidiary of Avon Cosmetics Limited.

In May 2022, Avon Products, Inc and Avon Cosmetics Limited entered into Promissory Notes with a subsidiary of Natura &Co Holding in the amount of $405 and $215 respectively. The Promissory Notes bear interest at a rate per annum of 6.71% and mature on May 17, 2029. In addition, in June 2022 Avon Cosmetics Limited entered into an additional Promissory Note with a subsidiary of Natura &Co Holding in the amount of $115. This Promissory Note bears interest at a rate per annum of 6.51% and matures on June 28, 2029.

At December 31, 2022, our debt and other financing maturing within one year of include $537 of intercompany loans between Natura &Co Luxembourg Holdings S.à r.l. and Avon Products, Inc. affiliates, including $226 drawn down under a $300 committed intercompany multi-currency revolving credit facility from an affiliate of Natura &Co expiring in November 2024.

In addition, our short term contractual financial obligations and commitments include approximately $101.8 relating to purchase obligations and approximately $39 relating to operating lease repayments. We also expect to make contributions in the range of $5 to $10 to our defined benefit pension and postretirement plans. These commitments and repayments are expected to be fulfilled through a combination of operating cash flows and where necessary, further financial support from Natura &Co Holding.

Other short-term financing

At December 31, 2022, we utilized approximately $5.7 of short-term financing from third-party banks across multiple markets bearing an average interest rate of per annum of 7.5%.

Letters of Credit

At December 31, 2022 and 2021, we also had letters of credit outstanding totaling $5.6 and $11.3, respectively. These balances primarily relate to a letter of credit issued to a lessor of certain equipment, a lease which was transferred to New Avon in connection with the separation of the Company's North America business, and letters of credit which guarantee various insurance activities.

Long-Term Credit Ratings

Our long-term credit ratings are: Moody’s ratings of Stable Outlook with Ba3 for corporate family debt; S&P ratings of Stable Outlook with BB- for corporate family debt and senior unsecured debt; and Fitch rating of Positive Outlook with BB for corporate family and unsecured debt.

Our credit ratings remain below investment grade which may impact our ability to access financing transactions on favorable terms.