Cosmetics large Revlon filed for Chapter 11 chapter safety on Wednesday night because it grappled with a cumbersome debt load and a snarled provide chain.
The corporate mentioned it expects to obtain $575 million in debtor-in-possession financing from its current lender base, which can assist to assist its day-to-day operations.
The submitting “will permit Revlon to supply our shoppers the enduring merchandise we have now delivered for many years, whereas offering a clearer path for our future progress,” Revlon President and Chief Government Officer Debra Perelman mentioned in a press launch issued Thursday morning.
“Our difficult capital construction has restricted our capacity to navigate macro-economic points in an effort to meet this demand,” Perelman added.
Revlon’s chapter submitting mentioned the corporate is at the moment unable to well timed fill nearly one-third of buyer demand for its merchandise, as a consequence of an incapability to supply a “adequate and common provide of uncooked supplies.” Delivery elements from China to the US takes Revlon eight to 12 weeks and prices 4 instances 2019 costs, it mentioned.
Revlon is the primary main consumer-facing enterprise to file for chapter safety in what has been a yearslong pause of misery within the retail sector. Greater than three dozen retailers filed for chapter in 2020, marking an 11-year excessive, which specialists say was an intensive and Covid pandemic-driven pull-forward of restructuring exercise.
Via Could 31, S&P International Market Intelligence tracked 143 bankruptcies, throughout all industries, thus far this 12 months, which is the slowest tempo since at the very least 2010. S&P solely tracked three retail chapter filings over the identical interval, the bottom rely in at the very least 12 years, it mentioned.
Now, nevertheless, as inflation rages, rates of interest rise and shoppers start to drag again spending on discretionary gadgets, specialists predict extra retail corporations shall be pressured to restructure. Significantly as many of those companies grapple with ongoing provide chain challenges which have left them with the flawed inventories.
The nail polish and lipstick maker, which is managed by billionaire Ron Perelman’s MacAndrews & Forbes, listed property and liabilities between $1 billion and $10 billion, based on a submitting with the U.S. Chapter Court docket for the Southern District of New York.
Revlon had long-term debt of $3.31 billion as of March 31, a securities submitting reveals. The corporate’s market cap was almost $123 million as of the shut of buying and selling Wednesday. Buying and selling of Revlon shares was halted in Thursday’s premarket session.
In late 2020, as stuck-at-home shoppers dramatically curtailed their spending on magnificence gadgets, Revlon narrowly prevented chapter when sufficient bondholders took half in its debt restructuring program. The corporate had warned in early November of that 12 months that it might be compelled to file for Chapter 11 safety.
Its gross sales of about $1.9 billion in 2020 have been down 21% from 2019 ranges. Although the enterprise rebounded in 2021, Revlon’s income remains to be beneath pre-pandemic ranges.
Begin-ups together with Glossier, Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Magnificence have additionally challenged Revlon because it vies for youthful shoppers’ {dollars}.
Perelman’s MacAndrews & Forbes acquired Revlon in a hostile takeover for about $1.8 billion in 1985. It went public 11 years later.
The enterprise grew through the years by means of acquisitions, together with of Coty’s Cutex enterprise and Elizabeth Arden. Along with its namesake make-up banner, its portfolio additionally contains Almay, American Crew and Britney Spears Fragrances.
Revlon may use its time in chapter proceedings to prune its portfolio, given it owns quite a few manufacturers, a few of that are performing higher than others, mentioned David Silverman, a retail senior director at Fitch Scores.
“If executed successfully, Revlon may emerge from chapter with a cleaner stability sheet and a greater working profile, bettering long term enterprise prospects,” Silverman mentioned.
PJT Companions is performing as monetary advisor to Revlon, and Alvarez & Marsal is performing as restructuring advisor.
