Cosmetic Giants, Revlon Inc. has filed for bankruptcy under Chapter 11 as they cannot manage their huge debts along with steep inflation and supply chain crunch.
What’s more?
As per Bloomberg News, the company owned by Ron Perelman, a billionaire is seeking protection from the court in the Southern District of New York. The company listed total assets of $2.3 billion as of April, which is in sharp contrast to $3.7 billion of total debts. They include senior notes with a coupon rate of 6.25% and are due for maturity in 2024, according to the court papers filed on June 15.
Chapter 11 bankruptcy filings allow companies to operate without any restriction and, at the same time, work out plans on how to pay the creditors. Revlon’s bankruptcy marks the end of the tumultuous phase for the company, which suffered during the pandemic after years of declining sales caused by the competition from new brands, which ate into the company’s market share and changing consumer preferences.
The 90-year-old brand started off selling nail polishes during the Great Depression days and later added matching lipsticks to its collection. The company became an international brand.
MacAndrews & Forbes Inc., the parent company of Perelman, took control of Revlon in 1985 after an acrimonious tussle and funded the deal with junk debt raised by Michael Milken. It sued Revlon when the company accepted a lower offer from Forssmann Little & Co. This resulted in Delaware court giving a landmark judgment sometimes dubbed the “Revlon Rule” on Board members’ fiduciary duties.
In addition to the Dollar bond, Revlon has ten outstanding loans amounting to $2.6 billion, which are due for payment in the next three years, as per data from Bloomberg. The debt had proved problematic, mainly when the company sold more than $2 billion of bonds and loans for funding its purchase of Elizabeth Arden in 2016. The company owns brands including Almay and Cutex and markets them in more than 150 countries.
Revlon struggled to keep up with newer brands advertised heavily on social media in the last few years. The pandemic dealt another setback, followed by a crippled supply chain and rising inflation which dented the margins.
Revlon had prevented multiple defaults earlier by negotiating with the creditors to reschedule its repayment obligations out of court. However, it later got ensnared when Citibank Inc. committee an infamous blunder when, instead of making routine interest payment, paid by mistake around $900 million to the creditors of Revlon.
