The biggest remaining hurdle to a plan that would enable the cosmetics manufacturer to emerge from bankruptcy by April has been removed, as Revlon Inc. struck a deal with a holdout section of lenders on Tuesday.
Revlon’s restructuring process no longer faces the possibility that “litigation and complex conflicts will overwhelm” it thanks to the most recent deal, the company’s attorney Alice Eaton told U.S. Bankruptcy Judge David Jones at a hearing in Manhattan.
A crucial step in the company’s bankruptcy case, according to Jones, is that Revlon can now submit its restructuring plan for a vote to creditors. Revlon’s restructuring plan would eliminate $2.7 billion in debt, cancel outstanding stock shares, and raise $670 million through the sale of equity in the reformed business if allowed by creditors and the court.
The 2020 loan that allowed the business to borrow more money and gave the senior lenders more control over Revlon’s intellectual property assets was the subject of a lawsuit brought by the holdout faction, which had funded Revlon’s acquisition of cosmetics and fragrance company Elizabeth Arden in 2016.
The 2016 lenders will now have the option of receiving up to $56 million in cash or forgoing cash payments in exchange for up to 18% of the company’s post-bankruptcy equity shares.
The parameters of past agreements that Revlon negotiated with its senior lenders and junior creditors are unaffected by Tuesday’s agreement.
Most of the business’ equity, which is estimated to be worth $2.75 billion to $3.25 billion, will go to the senior lenders. Junior creditors will get payments of up to $44 million, including retirees with unresolved pension claims and customers who filed personal injury claims against Revlon.
Ron Perelman’s MacAndrew & Forbes, which controlled 85% of the stock at the time of the bankruptcy filing, owns the majority of Revlon. Retail investors showed increased interest in the company’s stock last year, which traded above $8 per share early in the company’s bankruptcy. On Tuesday, they were exchanged at $0.66.
Revlon, which has been in business for 91 years and sells lipstick, nail polish, and other cosmetics, filed for bankruptcy in June, claiming that its $3.5 billion debt load and pandemic-related disruptions left it with insufficient cash to make necessary payments to key suppliers in its cosmetics supply chain.
