S&P Global Ratings has upgraded Herbalife Ltd. (NYSE:HLF) one notch to 'BB-' from 'B+' and set a stable outlook, pointing to the company's improved operating trends and management's adherence to financial policy targets. The firm highlighted management's goal to cap company-defined gross leverage at 3x and to reduce gross debt to $1.4 billion by 2028 as central to its view.
The upgrade coincides with Herbalife's plan to refinance portions of its capital structure - a move intended to lengthen maturities on senior secured debt while lowering interest expense and scheduled amortization. As part of that refinancing, S&P Global Ratings assigned an issue-level rating of 'BB+' and a recovery rating of '1' to a proposed $425 million five-year revolving credit facility, which the ratings firm said is expected to provide very high recovery in the event of a default - in the range of 90% to 100%.
In addition, S&P Global Ratings assigned a 'BB' issue-level rating and a recovery rating of '2' to a proposed $125 million senior secured term loan A and a proposed $500 million senior secured term loan B, indicating substantial recovery expectations of 70% to 90% in a default scenario. The company also intends to issue $500 million of other secured debt over the coming weeks.
S&P noted stabilization in Herbalife's operating performance during the second half of 2025, attributing the improvement to management actions focused on raising distributor productivity and growing volumes. For the full year 2025, net revenue rose by 0.9% - roughly 2.5% on a constant currency basis excluding foreign exchange headwinds - with the increase driven largely by pricing despite a 0.5% decline in volumes.
The ratings firm said Herbalife expanded its S&P Global Ratings-adjusted EBITDA by 15% to $700 million in 2025 and repaid about $280 million of debt, bringing adjusted gross leverage down to 3.1x from 4.1x in 2024. Pro forma for the contemplated refinancing transaction, S&P expects adjusted leverage to tick up modestly to 3.3x from 3.1x as of year-end 2025, while noting that lower interest expense should support higher cash flow generation and additional debt repayment.
S&P Global Ratings' financial projections anticipate further deleveraging over the next two years. The firm forecasts adjusted leverage of 2.9x in 2026 and 2.5x in 2027, reflecting the expectation that Herbalife will use free operating cash flow to lower gross debt to about $1.4 billion by 2028. Revenue is forecast to grow 2.8% in 2026, supported primarily by pricing and modest volume gains.
The ratings house also expects adjusted EBITDA to rise 6% to $740 million in 2026 as operating leverage improves from higher revenue and lower restructuring and other one-time costs. S&P forecasts Herbalife will generate roughly $260 million of free operating cash flow in 2026 and anticipates $650 million in debt repayments over the next three years, reducing gross debt to $1.4 billion by 2028.
Key takeaways
- S&P upgraded Herbalife to 'BB-' from 'B+' and assigned stable outlook status.
- Proposed refinancing includes a $425 million five-year revolver (rated 'BB+' with recovery rating '1') and secured term loans of $125 million and $500 million (rated 'BB' with recovery rating '2').
- S&P projects continued deleveraging - adjusted leverage forecast at 2.9x in 2026 and 2.5x in 2027 - and a path to roughly $1.4 billion in gross debt by 2028.
Impacted areas
- Corporate credit and refinancing markets, through the company's planned secured debt issuance and refinancing activity.
- Consumer products and direct-selling performance, given the company's revenue and distributor productivity commentary.