Revlon Inc. is preparing. to present c . fileChapter 11 Protection As soon as next week after struggling for years with a lot of debt, fierce competition in the cosmetics space, more inflation pressures and a recent supply chain, people familiar with the matter said.
cosmetic maker, owned by billionaire Ron Perlman, MacAndrews & Forbes, is in restructuring talks with major lenders ahead of debt maturities starting next year. The bankruptcy filing could end Mr. Perelman’s control of Revlon, which was bought by his own company in 1985.
A person familiar with the matter said the situation was flexible and filing of the Chapter 11 file was not certain. Shares of Revlon fell 53% Friday to $2.05 a share.
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Revlon declined to comment. Sales rebounded 8% last quarter as consumers’ shopping habits returned closer to epidemic outbreak levels. But the company’s outlook remains challenged by its need to raise capital for liquidity needs, according to an April report from S&P Global Ratings.
Reorg Research previously reported that Revlon was planning to file for bankruptcy.
The earliest due date for the company’s debt is September 2023 and includes a $866 million loan that was repaid by chance in 2020 by managing agent Citigroup Inc. With its own money instead of Revlon. Some lenders returned the money to Citi, while others held about $500 million in incidental payments.
Citi sued them for the money, but a federal judge rejected his request last year. The bank has appealed, and the appeal decision is still pending. Revlon still owes the loan, but the appeals court ruling.
Some of Revlon’s lenders believe there may be some logic behind the company filing for bankruptcy sooner rather than later, before an appeal ruling, according to a person familiar with their thinking.
This person said that bankruptcy court might be the best forum for untangling the messy tangle between Citi’s casual payments and Revlon’s need to restructure its debt. City declined to comment.
A person familiar with the matter said that if Citi loses its appeal, it can also ask Revlon to repay the loan by the due date. But other people said Citi’s legal rights to demand loan repayments when due are not entirely clear.
Maturities on the remainder of Revlon’s $3.3 billion debt accumulate rapidly in 2024 and 2025. About half of the company’s debt is due by 2024, and the 2025 maturity of a $1.7 billion loan accelerates to 2024 if the company is unable to repay a bond maturing that year .
The company’s lenders were at odds with each other even before Citi’s accidental repayment. In 2020, a group of hedge funds accused the company of wrongfully stripping it of its secondary rights to intellectual property assets including American Crew, Elizabeth Arden, Almay and other brands.
Revlon used these brand assets to raise new funding that helped them weather the Covid-19 pandemic. Litigation over the debt transaction was suspended when Citi mistakenly repaid lenders.
People familiar with the matter said that if an appeals court orders the money back, that legal dispute is expected to appeal and lenders, including Brigade Capital Management, HPS Investment Partners and others, will likely join the restructuring negotiations. They did not immediately respond to requests for comment.
Andrew Scoria contributed to this article.