Revlon Reaches Deal to Avoid Bankruptcy
Billionaire Ron Perelman’s cosmetics company succeeded in persuading enough bondholders to extend maturing debt
Revlon Inc. said it has obtained adequate support from bondholders to avert a bankruptcy filing.
The New York-based cosmetics company said on Thursday that it has determined that close to 70% of the holders of a bond nearing maturity agreed to a debt-swap deal, gaining Revlon more time to pay off its loans.
Revlon, backed by billionaire Ron Perelman’s MacAndrews & Forbes Inc. and run by his daughter Debra Perelman, has been struggling with a heavy debt load, heightened competition, and changing consumer tastes. These struggles intensified with the onset of the coronavirus pandemic, which hit Revlon’s sales of lipstick and makeup as Americans used masks and spent more time at home.
Revlon has a $343 million bond which comes due on Feb.15. However, its debt agreements contain a requirement that this bond be refinanced at least three months before maturity, on Nov. 15, or it would trigger over $1 billion of senior loans to come due immediately. Since Revlon had less than $350 million of liquidity as of last month, the company wouldn’t be able to repay that amount and would have to seek bankruptcy protection.
The bond had been trading at heavily distressed levels of roughly 20 and 30 cents on the dollar for much of the past few months, as investors expected the company to seek bankruptcy protection.
Revlon, in July, launched an offer to buy the bonds back from the holders at a steep discount, though the company would pay cash for them.
The bond exchange garnered little support at first, and Revlon ended up repeatedly extending the deadline, and changing the financial terms. Ultimately the company offered to pay bondholders either 32.5 cents on the dollar in cash, or a mixture of cash and new debt.
The company said Thursday it reached a sufficient level of support from existing bondholders. The remaining $107 million of bonds that didn’t enter into the exchange will be paid out in full, at 100 cents on the dollar.
Billionaire Carl Icahn, who like Mr. Perelman, became famous on Wall Street as a corporate raider in the 1980s, had accumulated a sizable position in the bonds. At first, Mr. Icahn resisted participating in the exchange, concerned that too many other bondholders were refusing to enter the deal. However, after Revlon got traction in getting other investors to commit, Mr. Icahn recently tendered some or all of his bonds, the people said.
Revlon, faced with the prospect of bankruptcy, in recent weeks hired the restructuring firm Alvarez & Marsal to prepare a contingency plan for a potential chapter 11 filing, according to the people familiar with the matter.