By Katabella Roberts
Cosmetics giant Revlon filed for Chapter 11 bankruptcy protection on Wednesday after struggling with debt and competition from online-focused upstart brands and amid soaring inflation levels plus supply chain issues.
The company, owned by billionaire Ron Perelman’s MacAndrews & Forbes, listed assets totaling $2.3 billion as of late April, according to a June 15 filing with the U.S. Bankruptcy Court for the Southern District of New York cited by Bloomberg.
However, total debts are listed as $3.7 billion, which includes its 6.25 percent senior notes due in 2024, according to Bloomberg.
The company also has 10 loans with outstanding amounts totaling about $2.6 billion and maturing in the next three years, Bloomberg-compiled data show.
Chapter 11 filings allow a company to stay in business while it works out a plan of reorganization that is in the best interest of the creditors.
Revlon confirmed it had filed for Chapter 11 bankruptcy protection in a statement on Thursday and said it expects to receieve $575 million in debtor-in-possession from its existing lender base, which will help to support its day-to-day operations.
The filing will enable Revlon to continue offering its “iconic products” to consumers while “providing a clearer path for our future growth,” said Debra Perelman, Revlon’s President and Chief Executive Officer.
“Consumer demand for our products remains strong—people love our brands, and we continue to have a healthy market position. But our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand. By addressing these complex legacy debt constraints, we expect to be able to simplify our capital structure and significantly reduce our debt, enabling us to unlock the full potential of our globally recognized brands,” said Perelman.
Revlon added that it is aiming for a “seamless” reorganization while thanking key stakeholders, employees, customers, and vendors, for their support.
Revlon was formed in 1932 by brothers Charles and Joseph Revson and Charles Lachman and later sold to MacAndrews & Forbes in 1985 before going public 11 years later.
The makeup giant bought Elizabeth Arden in an $870 million deal in 2016 to strengthen its skincare and fragrance business and expand its markets in Asia, and has been helmed by Perelman’s daughter Debra Perelman since mid-2018.
However, it has in recent years faced increasing competition from startups backed by celebrities such as Kylie Jenner’s Kylie Cosmetics and Fenty Beauty by Rihanna, both of which have garnered cult followings in part thanks to promotions by a slew of social media influencers.
The bankruptcy filing comes just days after The Wall Street Journal reported Revlon had initiated talks with lenders to avoid bankruptcy ahead of maturities of debt that begin in 2023.
The first of those upcoming debt maturities is in September 2023 and involves a nearly $900 million interest payment that was accidentally paid off to the cosmetic company’s lenders by a trader at Citigroup in 2020, instead of the intended $8 million, WSJ reports.
Citigroup Inc. blamed human error for the mistake, and the bank was fined $400 million by U.S. regulators for failing to correct longstanding deficiencies in its risk and control systems.
U.S. District Judge Jesse Furman in Manhattan ruled in 2020 that the lenders could keep that money, stating that the transfers were “final and complete transactions, not subject to revocation.” Citigroup has appealed that decision.
During last month’s first quarter 2022 results earnings call, Revlon said it was hoping to “ensure sufficient liquidity to support both our growth and our capital structure” amid supply chain disruptions and other “emerging macroeconomic challenges that continue to impact businesses across most industries.”
Revlon posted net sales of $479.6 million in the first quarter of 2022, compared to $445.0 million during the prior-year period, marking an increase of $34.6 million, or 7.8 percent.
Meanwhile, operating income was $23.7 million in the first three months to March, compared to an operating loss of $12.7 million during the prior-year period, an improvement of $36.4 million.
Reported net loss was $67.0 million in the first quarter, versus a $96.0 million net loss in the same period a year prior.
Despite reports of an impending Chapter 11 filing, shares of Revlon surged in the first half of trading earlier this week on Tuesday. They are currently trading up 20.32 percent as of June 16.