Revlon Avoids Bankruptcy After Closing Last Minute Debt Deal

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Updates from Revlon Inc

Revlon was pulled from the brink of bankruptcy after billionaires Ron Perelman and Carl Icahn ended a deadlock on the cosmetics company’s debt.

Mr Icahn had resisted in a month-long attempt by Revlon to trade $ 343 million in bonds maturing in 2021 at a steep discount, as the company sought to get its finance debt under control ahead of a week due. next that she had warned that she might tip him over. bankrupt.

The potential insolvency would have wiped out Mr. Perelman’s 87 percent ownership of the outstanding shares of Revlon, which he took control in 1985 after a hostile takeover battle fueled by Michael Milken’s junk bonds. The company is now run by his daughter Debra Perelman.

It would also have left Mr Icahn healing the losses as one of the biggest bondholders, according to people familiar with the situation.

But by the eleventh hour, the two billionaires who dueled in the late 1990s over Marvel Entertainment, the comic book empire, broke the deadlock.

Revlon said Thursday it had secured commitments from enough bondholders to avoid bankruptcy, with about $ 236 million deposited, just under 69% of outstanding debt. People familiar with the deal said it would not have been a success without Mr Icahn waiving at least some of his obligations.

“As a result, the company does not expect bankruptcy or insolvency proceedings to be necessary,” the company said in a statement Thursday.

MacAndrews & Forbes, Mr Perelman’s company, and Mr Icahn did not immediately respond to requests for comment.

Bondholders participating in the exchange agreed to receive either 32.5 cents on the dollar or a mix of cash and a new loan. Those who do not participate will be refunded in full, the company said.

The battle had created a dilemma for other bondholders: to hope that a sufficient number of other investors subscribe to the exchange offer for them to get all of their money back, or to accept the deal at a price. reduced lest the company default, resulting in an even lower return.

Revlon extended the exchange offer for the third time last week, when only 36% of bondholders had signed up.

Failure of the deal would have triggered the prepayment of Revlon’s other senior debt, causing the company to go bankrupt, he warned.

“While we still have challenges ahead – namely the continued impact of the Covid-19 pandemic – we believe we have the right strategy in place and we will continue to execute it,” Ms. Perelman said.

Revlon’s turbulent year

March

Revlon announces cost reductions of between $ 200 and $ 230 million, of which about 60% will come from job cuts occurring in 2020.

August

Citi accidentally transfers $ 900 million to Revlon creditors, with number of funds still refusing to return the money.

September

Revlon’s first attempt to trade its bonds fails with just 5% of the debt put forward by bondholders for the deal.

October

Revlon is repeatedly extending the timeline for a revised exchange offer as it continues to face reluctance from investors.

November

Revlon obtains sufficient support from creditors for the bond swap. It had a deadline of November 16 to repay its 2021 bond, before triggering the early repayment of its loans and potentially bankrupting the company.

Revlon’s share price climbed nearly 50 percent to $ 8.80 on Tuesday, and is up nearly 100 percent for the week to $ 10.77, as investors began to modify expectations for society.

The company’s bonds doubled in value from about 36 cents on the dollar to 62 cents on Tuesday, where they remained. More than a million dollars worth of bonds were even trading at 100 cents before the deal was announced, according to traders.

While Mr Icahn was crucial to the success of the exchange, many other small bondholders were also needed to accept the offer, with a large chunk of the bonds believed to have been held by ‘mom and pop’ investors. unknown, according to people familiar with the company’s debt. Revlon even created a website to try to get holders to come forward and participate in the exchange.

“If you don’t act now to participate in the company’s pending exchange offer, your ticket refund will be in jeopardy. Your participation is extremely important, ”the website warned.

Mr. Perelman has sold a succession of assets in recent months, resulting from the holdings of his holding in Scientific games and AM General to paintings by Henri Matisse and Joan Miró, and his 281-foot C2 yacht, which is on the market for 90 M €. In August, he told Vanity Fair that he wanted “a less complicated, less indebted working life.”

The company’s debt became a flashpoint on Wall Street earlier this summer after Citigroup wired by mistake about $ 900 million in bank money to Revlon’s creditors. The bank remains in dispute with funds that refused to return the money. He is still seeking to recover more than $ 500 million of the sum.

Revlon, which has been a household name in the United States since World War II, had struggled to bring down sales before the coronavirus even hit the cosmetics market. The company has reported losses for four consecutive years and has given way to new beauty brands, including Fenty Beauty. In March, Revlon announced it would lay off staff to cut costs.

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