Revlon Inc. is preparing to file for Chapter 11 protection as early as next week after years of struggling with too much debt, fierce cosmetics competition and more recent inflation and supply chain pressures. , said people familiar with the matter.
The cosmetics maker, owned by billionaire Ron Perelman’s MacAndrews & Forbes, is in restructuring talks with top lenders ahead of debt maturities starting next year. A bankruptcy filing could end Mr. Perelman’s control of Revlon, which his private equity firm bought in 1985.
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The situation is fluid and a Chapter 11 filing is not certain, said a person familiar with the matter. Shares of Revlon fell 53% on Friday to $2.05 per share.
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Revlon declined to comment. Sales rebounded 8% in the last quarter as consumer shopping habits edged closer to pre-pandemic levels. But the company’s outlook is still challenged by its need to raise capital for its liquidity needs, according to an April report from S&P Global Ratings.
Reorg Research reported earlier that Revlon plans to file for bankruptcy.
The company’s next debt maturity is September 2023 and involves an $866 million loan that was accidentally repaid in 2020 by administrative agent Citigroup Inc. with its own money rather than Revlon’s. Some lenders returned the money to Citi, but others kept about $500 million from the accidental payment.
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Citi sued them for the money but was denied its claim by a federal judge last year. The bank has appealed and an appeal decision is pending. Revlon still owes the loan, but the appeals court rules.
Some of Revlon’s lenders believe there might be some logic in the company filing for bankruptcy as soon as possible, before the appeal decision, according to a person familiar with their thinking.
Bankruptcy court is perhaps the best forum to untangle the messy interplay between Citi’s accidental payment and Revlon’s need to restructure its debt, this person said. Citi declined to comment.
If Citi loses its appeal, it could also seek repayment of the loan from Revlon before the due date, a person familiar with the matter said. But Citi’s legal rights to seek repayment of the loans when due are not entirely clear, other people said.
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Maturities on Revlon’s remaining $3.3 billion of debt are accumulating rapidly in 2024 and 2025. About half of the company’s debt is due by 2024, and the maturity date from 2025 on a $1.7 billion loan accelerates to 2024 if the company is unable to repay a bond due that year.
The company’s lenders were at odds with each other even before Citi’s accidental payment. In 2020, a group of hedge funds accused the company of wrongfully removing its collateral rights to intellectual property assets, including the American Crew, Elizabeth Arden, Almay and other brands.
Revlon used these brand assets to raise new funding that helped it weather the Covid-19 pandemic. Litigation over the debt transaction was suspended when Citi paid the lenders in error.
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If the appeals court orders the money back, that litigation is expected to resume and the lenders, which include Brigade Capital Management, HPS Investment Partners and others, would likely join the restructuring talks, people familiar with the lawsuit said. case. They did not immediately respond to requests for comment.
—Andrew Scurria contributed to this article.
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