After 90 years, the famous US cosmetics company Revlon has filed for Chapter 11 bankruptcy protection in order to restructure its debt.
In a statement issued overnight Australian time, the company said the business would continue to operate as normal, with vendors and partners paid under normal terms for goods and services received after the filing date, and employees would continue to be paid as usual.
As part of the process, the company’s existing lenders will provide working capital of around US$575 million to allow the business to continue to trade.
Analysts say the company’s collapse is due to its existing legacy debt levels amplified by worsening trading conditions caused by global supply chain challenges and inflation.
“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,” said Debra Perelman, Revlon’s president and CEO.
“Consumer demand for our products remains strong – people love our brands, and we continue to have a healthy market position. But our challenging capital structure has limited our ability to navigate macro-economic issues in order to meet this demand. By addressing these complex legacy debt constraints, we expect to be able to simplify our capital structure and significantly reduce our debt, enabling us to unlock the full potential of our globally recognised brands,” she said.
Perelman is the daughter of billionaire Ron Perelman, whose investment company MacAndrews & Forbes bought Revlon in 1985 in a hostile takeover. He subsequently refloated it in 1996 but retained an 84.7 per cent stake and remains chairman.
The Chapter 11 process affects only Revlon’s US, Canadian and UK arms.
Revlon is one of the world’s largest cosmetics companies, with sales of about $2.1 billion last year, according to Statista. Its products include colour cosmetics, skincare, hair colour, hair care and fragrance products under brands including Revlon, Elizabeth Arden, Almay, Mitchum, CND, American Crew, Creme of Nature, Cutex, Juicy Couture, Elizabeth Taylor, Britney Spears, Curve, John Varvatos, Christina Aguilera and AllSaints.
The company was particularly hard hit by the Covid-19 pandemic in 2020 when sales fell by 21 per cent worldwide to $1.9 billion, before recovering last year as people returned to shops, social occasions and workplaces.
Analyst David Garfield, MD at AlixPartners, told the New York Times that consumer companies are vulnerable to trouble if they take on too much debt or fail to manage major disruptions to the supply chain.
“The issue there is that it can become a vicious cycle: So supply chain disruptions can cause production delays, which can cause late shipments to retailers, which can cause loss of shelf space and sales – and then the cycle repeats,” he said.