Coty reaffirms leverage targets at CAGNY Conference

Coty (Secured; Ba2 Pos, BB+ Pos, BB+ Pos) management reaffirming guidance, including FY24 EBTIDA of $1.08-$1.09b (c$1.09b) & leverage target of 2.5* by CY24 & 2* by CY25. As we noted late last week the € curve was "pric[ing] more in line with crossover rating despite uncertainty remaining on the path to IG - not only from headline performance/FCF generation (c$480m/+20%yoy, Moody's & Company; $400m in FY24) but also the timing of asset sales (like the Wella stake/~$1.1b which company expects to sell by CY25) - both required to bring leverage into IG/company targets."

The Coty curve has been mixed since - 26's holding onto post earnings move (we saw value post earnings at 4.1%/€99.5 - mids are ~15bps tighter since). In contrast 28's have reversed higher in recent sessions. Moody's one-notch upgrade to the parent/unsecured ratings, but no uplift to secured ratings (on less unsecured in the stack) may have tempered pricing on the pace of an uplift. S&P yet to comment post-earnings.

€26's seem to continue pricing high certainty on the move into IG, no firm view on the 28's but it does screen cheap vs. the 26's & $ curve.