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Revlon Inc. is preparing to apply for protection under Chapter 11 as early as next week, after years of battling too much debt, strong competition in the cosmetics business and more recent inflation and pressure in the supply chain, insiders said.
Cosmetics maker, owned by billionaire Ron Perelman’s MacAndrews & Forbes, is in talks to restructure with top creditors ahead of a debt that begins next year. Filing for bankruptcy could end Mr Perelman’s control of Revlon, which his private investment firm bought in 1985.
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The situation is fluid and the submission of Chapter 11 is uncertain, said a person familiar with the matter. Shares of Revlon fell 53% on Friday to $ 2.05 per share.
Ticker protection Last change% REV REVLON 2.05 -2.37 -53.62%
Revlon declined to comment. Sales rose 8% in the last quarter as consumer shopping habits returned to pre-pandemic levels. But the company’s prospects are still driven by its need to raise capital for liquidity, according to an April report by S&P Global Ratings.
Earlier, Reorg Research reported that Revlon plans to file for bankruptcy.
The nearest forthcoming maturity of the company’s debt is in September 2023 and includes a loan of 866 million dollars, which was repaid accidentally in 2020 by the administrative agent Citigroup Inc. with own money, not Revlon money. Some creditors returned the money to Citi, but others retained approximately $ 500 million from the accidental payment.
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Citi is suing them for the money, but last year his request was rejected by a federal judge. The bank has appealed and the decision is pending. Revlon still owes the loan, but the appellate court decides.
Some of Revlon’s creditors believe it may make sense for the company to file for bankruptcy sooner or later, before the appellate decision, according to someone familiar with their thinking.
Revlon makeup products are on display at the CVS store. (Photo by Justin Sullivan / Getty Images) (Photo by Justin Sullivan / Getty Images) / Getty Images)
The insolvency court may be the best forum for unraveling the confusing interaction between Citi’s accidental payment and Revlon’s need to restructure its debt, the man said. Citi declined to comment.
If Citi loses its appeal, it may also demand repayment of the loan from Revlon by the due date, said a source familiar with the matter. But Citi’s legal rights to seek repayment of loans at maturity are not entirely clear, others said.
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The remaining $ 3.3 billion of Revlon’s debt matures rapidly in 2024 and 2025. About half of the company’s debt is due by 2024, and the maturity date in 2025 of a $ 1.7 billion loan is due. accelerates to 2024 if the company is unable to repay a bond due in the same year.
SAUSALITO, CA – AUGUST 09: Revlon makeup products are on display at the CVS store on August 9, 2018 in Sausalito, California. Revlon reported second-quarter earnings that did not meet analysts’ expectations of $ 606.8 million compared to (Photo by Justin Sullivan / Getty Images)
The company’s creditors were at odds with each other even before the accidental payment to Citi. In 2020, a group of hedge funds accused the company of illegally revoking collateral rights on intellectual property assets, including American Crew, Elizabeth Arden, Almay and other brands.
Revlon is using these brand assets to raise new funding that has helped it overcome the Covid-19 pandemic. The lawsuit over the debt deal was halted when Citi paid the creditors by mistake.
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If the appellate court orders the money back, the lawsuit is expected to resume and creditors, which include Brigade Capital Management, HPS Investment Partners and others, are likely to join the restructuring talks, officials said. They did not respond immediately to requests for comment.
-Andrew Curia contributed to this article.
Write to Soma Biswas at soma.biswas@wsj.comBecky Jerak at becky.yerak@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com
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