Revlon has moved one step closer to exiting bankruptcy after the embattled beauty brand reached a deal with its creditors.
The owner’s restructuring plan has now been sent to creditors for a vote, which if approved will cut its current US$3.7bn debt by $2.7bn.
Revlon will need to pay off any remaining debts by April 2023 to exit bankruptcy.
The company has struggled for years with annual sales tumbling from $2.6bn at its peak in 2017 to $1.9bn in 2020.
This culminated in Revlon filing for bankruptcy on 17 June 2022.
Revlon previously escaped bankruptcy in 2020 after successfully tendering $236m of bondholder notes.
But increasing competition and supply chain issues caused by the Covid-19 pandemic placed pressure on the owner of Elizabeth Arden and Almay.
The brand was offered a moment of reprieve after a US$1.4bn bankruptcy loan was approved on 1 August 2022.
Stocks in the company rose by 3.63% to $9.59 per share at the time, a jump of 60.9% when compared with the extended slump it saw after filing for Chapter 11.
A surprise turn also came in December 2022 when the embattled beauty brand was fully acquired by its lenders.
The move completely wiped out the business’ shareholders, and led to the ousting of long-time owner Ron Perelman.
The end of the tunnel?
The news of Revlon’s restructuring plan being approved has brought the beauty brand one step closer to breaking free of its bankruptcy woes.
But will the former beauty goliath be able to pay off its excess debt by the April 2023 deadline?
Katie James, Partner in the business support and insolvency team at commercial law firm Blake Morgan, told Cosmetics Business that with large companies such as Revlon, an “awful lot of preparatory work will have been done before the bankruptcy”.
“They wouldn't have gone into that process without that clear plan,” she added.
But while coming out of bankruptcy seems like a victory on the surface, James warned that the environment they are coming back into is still less than favourable.
This could be a particularly contentious issue as Revlon faced supply disruptions before falling into bankruptcy.
“There are still a lot of disruptors for a lot of businesses at the moment, including Covid, Brexit, the Russian war and its sanctions,” James continued.
These are still creating issues for businesses, meaning brands will either not get the product they are after at all, or will have to go somewhere else and pay more for it.
