Revlon files for bankruptcy, blames supply chain snags

(Reuters) -Cosmetics maker Revlon Inc has filed for individual bankruptcy, slipping target to world-wide provide chain disruptions that pushed up uncooked product costs and prompted suppliers to demand from customers upfront payments.

Acknowledged for its nail polishes and lipsticks, the 90-12 months-aged enterprise in modern yrs has dropped shelf space and revenue to startups backed by celebrities such as Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Elegance.

In its bankruptcy submitting, Revlon claimed supply chain disruptions in the spring prompted rigorous level of competition for substances utilized to make its merchandise. At the similar time, sellers that ordinarily available up to 75 days for payment began demanding dollars in advance of new orders, though labor shortages and inflation additional to its problems, it explained.

“For example, 1 tube of Revlon lipstick involves 35 to 40 raw elements and part pieces, every single of which is vital to bringing the product or service to market place,” Robert Caruso, who was hired as Revlon’s chief restructuring officer, wrote in a courtroom filing.

“With shortages of important substances across the company’s portfolio, competitors for any accessible resources is steep.”

The COVID-19 pandemic has lengthened ship shipping periods considering the fact that 2020, pushing up freight fees, when the Russia-Ukraine conflict and lockdowns in Shanghai have additional to offer chain disruptions this 12 months.

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

The shares experienced halved in market place price among previous Thursday and near of trading on Wednesday. Media stories of a potential personal bankruptcy submitting emerged on Friday.

Money owed MOUNTED

Revlon, which was formed in 1932 by brothers Charles and Joseph Revson and Charles Lachman, commenced off providing nail enamel. It was offered in 1985 to MacAndrews & Forbes – which stays the controlling shareholder and is owned by Ron Perelman – and went community 11 a long time later.

Revlon bought Elizabeth Arden in an $870 million skincare bet in 2016 to fend off competitors. It homes models such as Britney Spears Fragrances and Christina Aguilera Fragrances.

But the company’s profits lagged in excess of the years and in 2021 fell 22% from its 2017 ranges. In contrast, rivals like CoverGirl, owned by Coty Inc, have received sector share by investing greatly to increase provides.

The business also designed headlines two a long time back when Citigroup Inc accidentally sent virtually $900 million of its have income to Revlon’s loan providers.

Revlon questioned its bankrutpcy decide to validate that the Chapter 11 submitting would not quit Citibank’s ongoing attractiveness about the $504 million it is even now hoping to recover fom Revlon loan providers. A fast prompt resolution of the dispute would assist its individual bankruptcy circumstance go forward, it claimed in court docket papers.

The mistaken payment is part of a advanced struggle concerning Revlon’s pre-individual bankruptcy creditors, who have jockeyed for management through Revlon’s makes an attempt to defer credit card debt payments.

An lawyer representing junior creditors, Clark Whitmore, reported in court docket that the senior lenders’ “feeding frenzy” would ruin price for stakeholders that are reduced on the foods chain.

Revlon plans to fund its individual bankruptcy case with $575 million in debtor-in-possession funding from its present lender base. It mentioned far more than $3.54 billion in liabilities in its court filing late on Wednesday.

The enterprise reported none of its global units, besides Canada and the United Kingdom, are section of the Chapter 11 individual bankruptcy proceedings.

Mittleman Brothers Expense Administration, which retains about 3% of the company’s stock, expressed hope equity holders would handle a decent payout irrespective of the bankruptcy.

That could take place if Revlon manages increased profits that allow for it to defeat offer chain concerns, Chris Mittleman claimed in an e-mail to Reuters.