Cosmetics giant Revlon filed for Chapter 11 bankruptcy on Wednesday night as it struggled with heavy debt and a congested supply chain.
The company said it expects to receive $575 million in debtor-in-possession financing from its existing lender base, which will help support its day-to-day operations.
The filing “will allow Revlon to bring our consumers the iconic products we’ve offered for decades, while providing a clearer path for our future growth,” Revlon President and CEO Debra Perelman said in a statement. press release issued Thursday morning.
“Our challenging capital structure has limited our ability to manage macro issues to meet this demand,” Perelman added.
Revlon’s bankruptcy filing says the company is currently unable to meet nearly a third of customer demand for its products in a timely manner, due to an inability to source “sufficient and regular in raw materials”. Shipping components from China to the United States takes Revlon eight to 12 weeks and costs four times 2019 prices, he said.
Revlon is the first major consumer-facing company to file for bankruptcy in what has been a years-long hiatus in the retail industry. More than three dozen retailers filed for bankruptcy in 2020, marking an 11-year high, which experts said was a significant, Covid-pandemic-driven surge in restructuring activity.
Through May 31, S&P Global Market Intelligence has tracked 143 bankruptcies, across all industries, so far this year, the slowest pace since at least 2010. S&P has tracked just three bankruptcy filings. retail over the same period, the lowest number in at least 12 years, he said.
Now, however, as inflation rages, interest rates rise and consumers begin to cut spending on discretionary items, experts predict that more retail businesses will be forced to restructure. Especially since many of these companies are struggling with ongoing supply chain challenges that have left them with the wrong inventories.
The nail polish and lipstick maker, which is controlled by billionaire Ron Perelman’s MacAndrews & Forbes, has listed assets and liabilities between $1 billion and $10 billion, according to a filing in the US bankruptcy court. Southern District of New York.
Revlon had long-term debt of $3.31 billion as of March 31, according to a securities filing. The company’s market capitalization was nearly $123 million at the close of trading on Wednesday. Trading in Revlon shares was halted during Thursday’s premarket session.
In late 2020, as stuck-at-home consumers drastically cut spending on beauty items, Revlon narrowly avoided bankruptcy when enough bondholders participated in its debt restructuring program. The company had warned in early November of that year that it might be forced to seek Chapter 11 protection.
Its sales of about $1.9 billion in 2020 were down 21% from 2019 levels. Although business rebounded in 2021, Revlon’s revenue is still below pre-pandemic levels.
Start-ups such as Glossier, Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty have also challenged Revlon as it vies for money from young consumers.
Perelman’s MacAndrews & Forbes acquired Revlon in a hostile takeover for about $1.8 billion in 1985. It went public 11 years later.
The business has grown over the years through acquisitions, including the Cutex business of Coty and Elizabeth Arden. In addition to her eponymous makeup banner, her portfolio also includes Almay, American Crew and Britney Spears Fragrances.
Revlon could use its time in bankruptcy proceedings to shrink its portfolio, given that it owns many brands, some of which perform better than others, said David Silverman, senior director of retail at Fitch Ratings. .
“If executed effectively, Revlon could emerge from bankruptcy with a cleaner balance sheet and better operating profile, improving longer-term business prospects,” Silverman said.
PJT Partners is acting as financial advisor to Revlon, and Alvarez & Marsal is acting as restructuring advisor.