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Revlon files for bankruptcy, blames supply chain snags

Diana L. Skinner June 17, 2022

June 16 (Reuters) – Cosmetics maker Revlon Inc (REV.N) has submitted for individual bankruptcy, slipping sufferer to worldwide provide chain disruptions that pushed up uncooked material costs and prompted distributors to demand from customers upfront payments.

Identified for its nail polishes and lipsticks, the 90-year-old business in current several years has missing shelf room and product sales to startups backed by celebrities this kind of as Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Magnificence.

In its bankruptcy filing, Revlon claimed offer chain disruptions in the spring prompted rigorous level of competition for substances applied to make its goods. At the exact same time, distributors that ordinarily made available up to 75 days for payment started demanding money in advance of new orders, whilst labor shortages and inflation extra to its difficulties, it claimed.

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“For case in point, just one tube of Revlon lipstick necessitates 35 to 40 raw supplies and component parts, every of which is significant to bringing the product or service to current market,” Robert Caruso, who was employed as Revlon’s chief restructuring officer, wrote in a court docket submitting.

“With shortages of vital substances throughout the company’s portfolio, competitiveness for any available materials is steep.”

The COVID-19 pandemic has lengthened ship shipping and delivery situations considering that 2020, pushing up freight costs, while the Russia-Ukraine conflict and lockdowns in Shanghai have additional to supply chain disruptions this 12 months.

Shares in Revlon fell as significantly as 44% on Thursday on the bankruptcy submitting just before closing down 13%.

The shares experienced halved in sector value involving very last Thursday and near of investing on Wednesday. Media experiences of a opportunity bankruptcy filing emerged on Friday.

Money owed MOUNTED

Revlon, which was formed in 1932 by brothers Charles and Joseph Revson and Charles Lachman, began off offering nail enamel. It was bought in 1985 to MacAndrews & Forbes – which continues to be the controlling shareholder and is owned by Ron Perelman – and went community 11 a long time afterwards.

A billboard owned by Revlon at Moments Sq. in the Manhattan borough of New York Oct 13, 2015. REUTERS/Carlo Allegri

Revlon purchased Elizabeth Arden in an $870 million skincare guess in 2016 to fend off levels of competition. It houses brand names such as Britney Spears Fragrances and Christina Aguilera Fragrances.

But the company’s sales lagged around the years and in 2021 fell 22% from its 2017 stages. In contrast, competition like CoverGirl, owned by Coty Inc (COTY.N), have received market place share by investing intensely to boost materials.

The organization also built headlines two a long time in the past when Citigroup Inc (C.N) accidentally despatched practically $900 million of its possess dollars to Revlon’s loan companies. read more

Revlon requested its bankrutpcy decide to affirm that the Chapter 11 submitting would not quit Citibank’s ongoing attractiveness above the $504 million it is nevertheless striving to recuperate fom Revlon loan providers. A speedy prompt resolution of the dispute would assist its bankruptcy circumstance shift ahead, it claimed in court papers.

The mistaken payment is element of a sophisticated battle in between Revlon’s pre-bankruptcy lenders, who have jockeyed for handle in the course of Revlon’s makes an attempt to defer credit card debt payments.

An legal professional symbolizing junior collectors, Clark Whitmore, claimed in courtroom that the senior lenders’ “feeding frenzy” would destroy worth for stakeholders that are reduce on the food stuff chain.

Revlon options to fund its individual bankruptcy case with $575 million in debtor-in-possession funding from its current loan provider foundation.It shown far more than $3.54 billion in liabilities in its courtroom filing late on Wednesday.

The business explained none of its global units, apart from Canada and the United Kingdom, are aspect of the Chapter 11 individual bankruptcy proceedings.

Mittleman Brothers Expenditure Management, which retains about 3% of the firm’s stock, expressed hope equity holders would deal with a good payout despite the individual bankruptcy.

That could happen if Revlon manages larger income that make it possible for it to triumph over provide chain challenges, Chris Mittleman reported in an email to Reuters.

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Reporting by Maria Ponnezhath and Praveen Paramasivam in Bengaluru Enhancing by Arun Koyyur, Shounak Dasgupta and Deepa Babington

Our Criteria: The Thomson Reuters Have confidence in Ideas.

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