Buying time: Coty takes on new debt for turnaround strategy

Coty has taken on US$900 million in new debt, due in 2031, to help pay off the US$1.2 billion it owes in 2026 and reduce short-term repayment pressure.

The company’s US$1.2 billion debt is split between two bond issues. With its new $900 million refinancing, the company aims to wipe out one bond entirely and trim the other, but it will still have some debt maturing in 2026.

The refinancing gives Coty a longer debt runway as the company contends with a weak financial year, posting a US$381 million annual loss.

The company recently launched a wide-ranging review of its Consumer Beauty division, raising questions about the future of brands such as CoverGirl.

By locking in funding until 2031, Coty is signaling to investors that it wants to stabilize its balance sheet while reassessing its portfolio and operational structure.

Transaction details

Coty and its subsidiaries, HFC Prestige Products and HFC Prestige International US, are borrowing the funds through a notes issuance with institutional and overseas investors. The notes carry an annual interest rate of 5.6% and are set to mature in October 2031.

As long as Coty maintains an investment-grade rating from at least two major credit agencies, the notes remain senior unsecured obligations without asset backing. This means investors are initially relying on Coty’s creditworthiness alone, and the debt is not tied to Coty’s assets.

If the company loses its investment-grade rating, the debt would then be backed by company assets to give investors extra protection in case of further financial deterioration.

Refinance reasoning

Coty says it is using the proceeds and cash reserves to redeem its 2026 debt obligations and give investors back the original amount they invested, in addition to any unpaid interest owed up to the repayment date.

The refinancing helps Coty avoid a large repayment cliff in 2026, when both tranches of notes would otherwise be due.

The move comes after a strategic review of its struggling Consumer Beauty division, which includes brands like Rimmel and CoverGirl.The transaction mirrors similar moves across the beauty and luxury sector, where companies have extended maturities and locked in funding early amid volatile markets.

Earlier this year, Eurofins secured a €500 million (US$586 million) loan to replace its existing €234 million (US$271.6 million) debt and create a more stable financial footing to ease its near-term financial obligations.

Similarly, in May this year, Kering issued a €750M (US$850.5 million) bond with a 125% yearly interest rate to improve its financial flexibility.

Corporate calamity

The refinancing comes against a backdrop of poor financial results, as Coty reported a US$381 million net loss for fiscal 2025, compared to a US$76 million profit the year before.

The company attributed the downturn to “innovation fatigue” in makeup and softer fragrance demand. Coty’s shares dropped almost 22% after the August earnings announcement, bringing their value to nearly half what they were at the beginning of 2025.

Just over a month later, the company launched a strategic review of its Consumer Beauty division.The review will consider partnerships, divestitures, or spin-offs to strengthen Coty’s balance sheet and sharpen its focus on its higher-margin categories.

Rumors have circulated that CoverGirl could be on the chopping block, though Coty declined to comment on brand-specific decisions.