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Cosmetics giant Revlon filed for bankruptcy protection on Chapter 11 on Wednesday night as it battled a cumbersome debt and torn supply chain.
The company said it expects to receive $ 575 million to finance a debtor from its existing creditor base, which will help sustain its day-to-day operations.
The document “will allow Revlon to offer our customers the iconic products we have delivered for decades, while providing a clearer path for our future growth,” Revlon President and CEO Debra Perelman said in a press release. on Thursday morning.
“Our challenging capital structure has limited our ability to navigate macroeconomic issues to meet this demand,” Perelman added.
Revlon’s insolvency statement says the company is currently unable to meet nearly a third of its customers’ demand for its products on time due to its inability to provide “a sufficient and regular supply of raw materials”. Delivery of components from China to the United States takes Revlon eight to 12 weeks and costs four times the price for 2019, it said.
Revlon is the first major consumer business to apply for bankruptcy protection during a long hiatus break in the retail sector. More than three dozen retailers have filed for bankruptcy in 2020, marking an 11-year high, which experts say is widespread and caused by the Covid pandemic’s involvement in restructuring.
As of May 31, S&P Global Market Intelligence has tracked 143 bankruptcies in all industries so far this year, the slowest pace since at least 2010. S&P tracked only three retail bankruptcies during the same period, the lowest of at least 12 years, it was said.
However, now that inflation is raging, interest rates are rising and consumers are starting to cut their spending on discretionary items, experts predict that more retailers will be pressured to restructure. Especially since many of these companies are struggling with current supply chain challenges that have left them with the wrong stocks.
Nail polish and lipstick maker, controlled by billionaire Ron Perelman’s MacAndrews & Forbes, has listed assets and liabilities of between $ 1 billion and $ 10 billion, according to US Insolvency Court documents for New York’s Southern District.
Revlon had a long-term debt of $ 3.31 billion as of March 31, according to the filing of securities. The company’s market capitalization was nearly $ 123 million at the end of trading on Wednesday. Revlon shares were suspended during the pre-market session on Thursday.
In late 2020, when home-based consumers drastically reduced their spending on cosmetics, Revlon narrowly escaped bankruptcy when enough bondholders took part in its debt restructuring program. The company warned in early November of that year that it could be forced to apply for protection under Chapter 11.
Its sales of about $ 1.9 billion in 2020 fell 21% from 2019. Although the business recovered in 2021, Revlon’s revenue is still below pre-pandemic levels.
Start-ups, including Glossier, Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty, have also challenged Revlon as it fights for dollars for younger consumers.
Perelman’s MacAndrews & Forbes acquired Revlon in a hostile takeover of about $ 1.8 billion in 1985. It went public 11 years later.
The business has grown over the years through acquisitions, including Coty’s Cutex and Elizabeth Arden’s. In addition to the makeup banner of the same name, his portfolio also includes Almay, American Crew and Britney Spears Fragrances.
PJT Partners acts as Revlon’s financial advisor and Alvarez & Marsal acts as restructuring advisor.
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