(Bloomberg) -- Oriflame Holding AG has moved four subsidiaries away from the reach of bondholders and is looking at raising new debt on those assets as it faces debt maturities.
The Swedish multi-level marketing company, which sells beauty and personal care products, has designated Cetes Cosmetics Poland, Cetes Cosmetics AG, Oriflame Cosmetics AG and Oriflame Software as unrestricted subsidiaries, it said in its second-quarter results published late on Thursday. Oriflame is in active discussions to raise financing using the assets of those entities as collateral, the company added.
The company needs new financing to address looming debt deadlines, mainly a €100 million ($111 million) revolving credit facility maturing in October 2025 and $550 million of bonds coming due in May 2026.
The move to label unrestricted subsidiaries is a practice allowed by documentation of some junk bonds and is growing in popularity for European high-yield borrowers. It lets firms shift assets away from the pool of guarantees pledged to bondholders and to raise new debt without needing the consent of its existing creditors.
“We have some concerns about the designation of new unrestricted subsidiaries which Oriflame intends to raise financing on,” wrote Si Yong Ng, an analyst at Lucror Analytics, in a note on Friday. “It’s unclear how any such proceeds will be utilized, and we await more information from the company.”
In Europe, the practice was recently used by telecommunications firm Altice France, which moved some entities outside of a restricted group ahead of talks over its debt pile. Investors are becoming increasingly concerned about the trend, with some pushing for stricter provisions in documentation for new bonds that would restrict it.
Oriflame has been grappling with a sharp drop in revenues and profits as its debt deadlines approach. Its euro sales decreased by 22% year-on-year in the six months ending June 30, while adjusted Ebitda at €12.6 million was less than half the level recorded the previous year, the second-quarter results showed. It had €78 million in cash at the end of June.
Its bonds are quoted at deeply distressed levels, with a discount of around 75% versus their face value, according to Bloomberg pricing. Oriflame’s creditors have been organizing since the start of the year with restructuring advisers.
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