Revlon has received the court’s approval to exit bankruptcy with a deal from its lenders that would slash $2.7 billion from its debt.
Under the arrangement, Revlon’s lenders will become the new owners in exchange for cutting the debt of the cosmetics brand, taking full control from previous shareholders.
The company’s reorganization plan was backed by 88% of the company’s 4,500 creditors, with the supporting creditors holding 98% of the company’s debt, according to Reuters.
The newly formed entity plans to raise $670 million from the sale of new equity shares, which will provide the brand with a much-needed fresh start and a sustainable foundation for future growth.
The 91-year-old brand filed for bankruptcy in June 2022 after pandemic-related challenges left it too cash-strapped to pay its supply chain partners. Revlon had $3.5 billion worth of debt at the time, which it avoided defaulting by cutting new deals with creditors. These efforts resulted in the company’s annual interest expense surpassing more than $200 million, leaving just $132 million in liquidity in March 2022.
When Revlon filed for bankruptcy, it reached settlements with two of its lenders who had reportedly helped fund its acquisitions of cosmetics and fragrance company Elizabeth Arden in 2016. However, both lenders fought over ownership of the company’s intellectual property rights.
The new deal will give the lenders that provided the brand with funding in 2020 the majority of equity, valued between $2.75 billion to $3.25 billion. Meanwhile, the ones that did not participate have the option to either receive $56 million in cash or 18% of shares in the newly formed entity.