NEW YORK — The ratings of about $2.5 billion in Revlon Inc. debt were cut by Moody’s Investor Service, which cited weak 1999 operating results and expectations of weak cash flow in the near term.
The rating agency said Revlon “will be challenged” to meet its requirement for EBITDA of $200 million under its bank covenants for the current year. It said risks tied to Revlon’s high leverage “are heightened by the competitiveness of the industry in which it competes,” as well as a $770 million debt payment due in March.
“The significant costs associated with Revlon’s heavy debt burden may continue to limit the company’s financial flexibility,” Moody’s said in a statement. “These costs could also make it more difficult for the company to compete against stronger and less leveraged competitors. Moody’s is concerned over the company’s market share losses, despite some stabilization in January 2000.
“Although Moody’s recognizes the positive steps that management has taken in order to improve the company’s operating performance, including recent restructuring initiatives which could produce annual savings of $30 to $40 million, the tangible impacts of these initiatives on the company’s earnings and cash flow remain to be seen. Moody’s believes Revlon’s operating performance may be fairly volatile in the intermediate term.”
Among the ratings cut were Revlon’s senior notes, to Caa1 from B3, and subordinate notes, to Caa3 from Caa2.

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