Revlon submitted a bankruptcy agreement that would give control of the company to secured lenders, according to documents filed with the U.S. Bankruptcy Court in the Southern District of New York. According to the restructuring agreement, Revlon seeks to raise $650 million in new equity and exit the bankruptcy process by April 17.
Revlon voluntarily filed for Chapter 11 bankruptcy in June, citing a heavy debt load, global inflation, and supply chain problems, listing assets totaling $2.3 billion as of late April and debts of $3.7 billion.
Debra Perelman, Revlon's President and Chief Executive Officer, said in a statement at the bankruptcy filing, "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."
The restructuring agreement, which a U.S. bankruptcy judge must approve before it takes effect, would provide $44 million to Revlon's unsecured creditors, who would otherwise be last in line for repayment of their debts, and requires Revlon to honor CEO Debra Perelman's current employment agreement, and outlines a new severance plan.
In October, Revlon said it was exploring a sale of the company as a potential exit from Chapter 11. The restructuring agreement allows Revlon to pursue a sale as long as the offer is high enough to repay its critical secure lenders fully. The secured lender faction, known as the Brandco lenders, includes private equity and hedge funds such as Ares Management and Oak Hill Advisors, which are owed close to $3 billion.
The proposed agreement wipes out Revlon's lowest-ranking creditors and leaves existing stockholders, including Ron Perelman, with nothing.
Ron Perelman acquired Revlon for $2.7 billion in 1985 in a leveraged buyout and owns 85% of the business through MacAndrews & Forbes, a holding company. His daughter, Debra Perelman was made President and CEO of the company and a member of its board of directors in 2018, becoming Revlon's first female CEO.
Saddled with debt and slow to adapt to new market realities, the beauty conglomerate wasn't equipped to navigate supply chain challenges that decimated its inventory. In a hyper-competitive environment, there was no shortage of hungry niche beauty brands looking to stake their claim on mass retail shelves to fill the void left by Revlon out-of-stocks.
