Hefty debt, rising inflation as well as ongoing supply chain issues led cosmetics major Revlon, Inc. to file for reorganization of its capital structure under Chapter 11 bankruptcy protection.
The 90-year old company and certain of its units filed petitions for reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Revlon, owned by billionaire Ron Perelman, reportedly listed assets and liabilities between $1 billion and $10 billion in the filing.
Meanwhile, none of the company’s international operating subsidiaries are included in the filing, except Canada and the U.K.
According to the company, the bankruptcy move would allow it to continue to operate seamlessly in all markets and focus on driving future growth, despite ongoing impacts of global supply chain challenges and rising inflation.
Upon receipt of court approval, Revlon expects to receive $575 million in debtor-in-possession or DIP financing from its existing lender base, providing liquidity to support day-to-day operations.
The maker of nail polish and lipstick is said to have had long-term debt of $3.31 billion. The Wall Street Journal reported earlier that Revlon had begun talks with lenders hoping to avoid bankruptcy.
In addition, Revlon, the manufacturer of color cosmetics, hair color and care, skincare, beauty care and fragrances, has been reporting loss for the past several quarters.
The company, with operations in more than 150 countries, has been struggling to find shelf space in the U.S. stores of late, amid stiff competition from online stores and many startups backed by celebrities. The rising inflation following the pandemic struggles added to the woes.
As of March 31, 2022, the company had around $132.1 million of available liquidity, consisting of $70 million of unrestricted cash and cash equivalents, as well as $65.1 million in available borrowing capacity.
In a statement, Debra Perelman, Revlon’s President and Chief Executive Officer, said, “Consumer demand for our products remains strong .. 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.”
Following the filing, Revlon will continue to run the business. As part of the reorganization process, the company will file customary “First Day” motions to allow it to maintain operations in the ordinary course.
Revlon intends to pay vendors and partners for goods and services received on or after the filing date, and to pay its employee.
The company expects to receive court approval for all of these routine requests.
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