S&P upgrades Herbalife rating due to improved operational performance

Investing.com - S&P Global Ratings today upgraded Herbalife Ltd. (NYSE:HLF) from “B+” to “BB-”, citing improved operating trends and management’s commitment to financial policy targets, including the company’s defined threefold leverage goal and reducing total debt to $1.4 billion by 2028. The outlook is stable. Concurrent with the upgrade, the company plans to refinance part of its capital structure to extend the maturity of senior secured debt and reduce interest expenses and debt amortization.

S&P Global Ratings assigned a “BB+” issue rating and a “1” recovery rating to the company’s proposed $425 million five-year revolving credit facility, indicating a high recovery expectation of 90%-100% in the event of default. The agency also assigned a “BB” issue rating and a “2” recovery rating to the proposed $125 million senior secured A-term loan and the proposed $500 million senior secured B-term loan, indicating a substantial recovery expectation of 70%-90% in default scenarios. The company plans to issue an additional $500 million of secured debt in the coming weeks.

Herbalife’s operational performance stabilized in the second half of 2025, driven by a focus on increasing distributor productivity and sales volume. In 2025, the company’s net income grew by 0.9%, approximately 2.5% excluding foreign exchange headwinds, mainly through price increases despite a 0.5% decline in sales volume. The company adjusted S&P Global Ratings’ forecasted EBITDA upward by 15% to $700 million and repaid about $280 million of debt, reducing its leverage ratio from 4.1x in 2024 to 3.1x.

Post-transaction, S&P Global Ratings expects the company’s adjusted leverage ratio to slightly increase from 3.1x at the end of 2025 to 3.3x, but lower interest expenses will support greater cash flow generation and debt repayment. The agency forecasts the adjusted leverage ratio to be 2.9x in 2026 and 2.5x in 2027, assuming Herbalife uses its free operating cash flow to reduce total debt to approximately $1.4 billion by 2028. S&P Global Ratings projects Herbalife’s revenue will grow by 2.8% in 2026, mainly driven by pricing and moderate sales growth.

S&P Global Ratings forecasts that Herbalife’s adjusted EBITDA will increase by 6% to $740 million in 2026, benefiting from revenue growth and operational leverage improvements due to restructuring and other one-time costs. The agency expects the company to generate approximately $260 million in free operating cash flow in 2026. Over the next three years, the company plans to repay $650 million of debt, with total debt reduced to $1.4 billion by 2028.

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