RISK FACTORS
Your investment in the Notes involves certain risks. In consultation with your own financial, tax, accounting and legal advisers, you should carefully consider, among other matters, the factors set forth below as well as the risk factors discussed in the accompanying prospectus and in our most
recent annual report on Form 10-K, together with our subsequent quarterly reports on Form 10-Q, which are incorporated by reference into this prospectus supplement and the accompanying prospectus before deciding whether to make an investment in the Notes.
Risks Related to the Notes
Our indebtedness could materially and adversely affect our ability to meet our debt service obligations under the Notes.
As of June 30, 2022, we had $7,986 million of indebtedness outstanding on a consolidated basis. Of such indebtedness, approximately $89 million was attributable to our subsidiaries. In addition, we have a $3,000 million revolving credit facility. At June 30, 2022, we had no outstanding borrowings
under the revolving credit facility.
Our level of indebtedness and the limitations imposed on us by our debt agreements could have significant adverse consequences to holders of the Notes. Our cash flow may be insufficient to meet our debt service obligations with respect to the Notes and our other indebtedness, which would
enable the lenders and other debtholders to accelerate the maturity of their indebtedness, or be insufficient to fund other important business uses after meeting such obligations. We may be unable to borrow additional funds as needed or on favorable terms. We may be unable to refinance our
indebtedness at maturity or earlier acceleration, if applicable, or the refinancing terms may be less favorable than the terms of our original indebtedness or otherwise be generally unfavorable. We may violate restrictive covenants in our debt agreements, which would entitle the lenders and other
debtholders to accelerate the maturity of their indebtedness.
If any one of these events were to occur, our business, financial condition, liquidity, results of operations and prospects, as well as our ability to satisfy our obligations with respect to the Notes, could be materially and adversely affected.
We may not be able to generate sufficient cash flow to meet our debt service obligations.
Our ability to meet our debt service obligations on, and to refinance, our indebtedness, including the Notes, and to fund our operations, working capital, acquisitions, capital expenditures and other important business uses, depends on our ability to generate sufficient cash flow in the future. To a
certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, regulatory and other factors, many of which are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to meet our debt service obligations on our indebtedness, including the Notes, or to fund our other important business
uses. As a result, we could be forced to take other actions to meet those obligations, such as raising equity or debt capital or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot assure you that we will be able to effect any of these actions
on favorable terms, or at all. Additionally, if we incur additional indebtedness in connection with future acquisitions or for any other purpose, our debt service obligations could increase significantly and our ability to meet those obligations could depend, in large part, on the returns from such acquisitions,
as to which no assurance can be given.
We may need to refinance all or a portion of our indebtedness, including the Notes, at or prior to maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things, our financial condition, liquidity, results of operations, and prospects and market
conditions at the time and restrictions in the agreements governing our indebtedness. As a result, we may not be able to refinance any of our indebtedness, including the Notes, on favorable terms, or at all.
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The Notes will be structurally subordinated to all the obligations of our subsidiaries and our ability to service our debt is dependent on the performance of our subsidiaries.
None of our subsidiaries will guarantee the Notes. Payments on the Notes are only required to be made by Colgate. As a result, no payments are required to be made by, and holders of Notes will not have a claim against the assets of, any of our subsidiaries, except if those assets are
transferred, by dividend or otherwise, to us. Accordingly, the Notes will be structurally subordinated in right of payment to all existing and future indebtedness and other liabilities, including trade payables and other accrued liabilities, of our subsidiaries. The incurrence of indebtedness or other liabilities
by any of our subsidiaries is not prohibited by the Indenture governing the Notes and could adversely affect our ability to pay our obligations on the Notes. As of June 30, 2022, indebtedness of our subsidiaries, excluding intercompany liabilities that would have been structurally senior to the Notes, was
approximately $89 million. We anticipate that from time to time our subsidiaries may incur additional debt and other liabilities. Additionally, the Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables and other accrued liabilities, of our
unconsolidated joint ventures.
The Notes will be unsecured and therefore will effectively be subordinated to any secured debt we may incur in the future.
The Notes will not be secured by any of our assets or those of our subsidiaries. As of June 30, 2022, we did not have any secured indebtedness outstanding on a consolidated basis. As a result, the Notes will be effectively subordinated to any secured debt we may incur to the extent of the value
of the assets securing such debt. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of our secured debt may assert rights against the secured assets in order to receive full payment of their debt before the assets may be used to pay the holders of the Notes.
A downgrade in our corporate credit ratings could materially adversely affect our financial condition, liquidity and results of operations and the market price of the Notes.
Our corporate credit ratings are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any rating will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. Moreover, such credit ratings are not recommendations to
buy, sell or hold the Notes or any other securities. If any credit rating agency downgrades our corporate ratings or otherwise indicates that its outlook for that rating is negative, it could have a material adverse effect on the market price of the Notes and our costs and availability of capital, which could
in turn have a material adverse effect on our financial condition, liquidity and results of operations and our ability to satisfy our debt service obligations (including payments on the Notes).
Redemption may adversely affect your return on the Notes.
The Notes of each series are redeemable at our option and we may choose to redeem some or all of the Notes of each series from time to time, especially when prevailing interest rates are lower than the rate borne by the Notes. If prevailing rates are lower at the time of redemption, you may not
be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes being redeemed. See Description of the NotesOptional Redemption.
An increase in interest rates could result in a decrease in the relative value of the Notes.
In general, as market interest rates rise, notes bearing interest at a fixed rate generally decline in value because the premium, if any, over market interest rates will decline. Consequently, if you purchase the Notes and market interest rates increase, the market value of your Notes may decline. We
cannot predict the future level of market interest rates.
The trading markets for the Notes may be limited.
Each series of Notes is a new issue of securities for which no established trading market exists. No assurance can be given that a trading market for any series of Notes will develop or be
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maintained. If an active trading market does not develop for any series of Notes, holders of the Notes may not be able to resell such Notes at all or at prices acceptable to them. Although the underwriters for this offering have advised us that they intend to make a market in each series of Notes after
completion of the offering, they are not obligated to do so and may discontinue market making at any time without notice. The liquidity of any trading market for, and future trading prices of, the Notes will depend on many factors, including, among other things, the number of holders of such Notes, our
operating results, cash flows, financial performance and prospects, prevailing interest rates, changes in our credit rating or outlook, the market for similar securities, the overall securities market and general economic conditions, and may be adversely affected by unfavorable changes in these factors.
Therefore, no assurance can be given as to the liquidity of any trading market for any series of Notes.
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