Cosmetics giant Revlon submitted its petition for protection under Chapter 11 of the United States Bankruptcy Court on Wednesday evening. The company was struggling under the weight of a substantial amount of debt as well as a clogged supply chain.
The business has said that it anticipates receiving $575 million in debtor-in-possession financing from its current lender base, which will assist in supporting its day-to-day operations and will help to keep the firm afloat.
“Today’s filing will allow Revlon to offer our consumers the iconic products we have delivered for decades while providing a clearer path for our future growth,” Debra Perelman, President and Chief Executive Officer of Revlon, said in a press release that was issued on Thursday morning. The statement was made in response to a question about whether or not the company would be able to continue offering the same products it has been delivering for decades.
According to Perelman, “Our tough capital structure has restricted our capacity to handle macro-economic challenges in order to fulfil this need.” Moreover, “Our problematic capital structure has constrained our ability to meet this demand.”
According to the bankruptcy petition that Revlon filed, the company is currently unable to timely fulfil almost one-third of customer demand for its products due to an inability to source a “sufficient and regular supply of raw materials.” This is a major factor in the company’s inability to meet customer demand. According to the report, it takes Revlon eight to twelve weeks and costs four times as much as the 2019 pricing to get components from China to the United States.
In what has been a relatively calm period for the retail industry over the last several years, Revlon has broken the silence by becoming the first big consumer-facing company to seek bankruptcy protection. The year 2020 saw an 11-year high for the number of shops declaring bankruptcy, which was a more broad and pandemic-driven pull-forward of restructuring activity, according to industry analysts. More than three dozen stores filed for bankruptcy.
Since at least 2010, S&P Global Market Intelligence has been tracking bankruptcies, and as of the 31st of May this year, they have counted 143 across all sectors. This is the slowest rate since at least 2010. According to S&P, over the same time period, there were just three retail bankruptcy filings, which is the lowest number recorded in at least 12 years.
Now, however, inflation is raging, borrowing rates are rising, and customers are beginning to cut down on spending on goods of discretion, and analysts expect that more retail enterprises will be forced to reorganise as a result of these factors. Especially considering the fact that many of these companies are struggling to overcome persistent supply chain issues, which has resulted in them having incorrect inventory.
According to a filing with the United States Bankruptcy Court for the Southern District of New York, the manufacturer of nail polish and lipstick, which is controlled by MacAndrews & Forbes, which in turn is controlled by billionaire Ron Perelman, listed assets and liabilities between $1 billion and $10 billion.
According to a document made with the Securities and Exchange Commission on March 31, Revlon has long-term debt of $3.31 billion. As of the closing of trade on Wednesday, the total market value of the firm was close to 123 million dollars. During Thursday’s premarket session, trading in Revlon shares was temporarily suspended.
Late in the year 2020, when customers who were unable to leave their homes drastically reduced their expenditure on beauty products, Revlon just averted bankruptcy thanks to the participation of sufficient investors in its debt restructuring scheme. At the beginning of November of that year, the firm issued a warning that it may be compelled to seek protection under Chapter 11 of the United States Code.
Its total sales in 2020, which were around $1.9 billion, were a 21 percent decrease from the levels it achieved in 2019. Revlon’s sales have increased after the pandemic ended in 2021, but it is still lower than it was before the outbreak.
Glossier, Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty are three examples of start-up companies that have competed with Revlon in the race for the financial support of younger customers.
In 1985, a hostile takeover led by Perelman’s MacAndrews & Forbes resulted in the acquisition of Revlon for about $1.8 billion. After 11 years, it was finally made public.
Through the years, the company expanded by purchasing other companies, including the Cutex business formerly owned by Coty and Elizabeth Arden. Almay, American Crew, and Britney Spears Fragrances are all part of the company’s portfolio of brands, in addition to the company’s eponymous beauty label.
Revlon’s financial advising needs are being handled by PJT Partners, while the company’s restructuring needs are being handled by Alvarez & Marsal.
