Revlon (REV) shares slumped lower in pre-market trading after the cosmetics group filed for Chapter 11 bankruptcy protection of its U.S. business.
Saddled with around $3.3 billon debt and suffering from supply chain snarls and increasing competition from nimbler rivals, Revlon listed liabilities of between $1 billion and $10 billion in its Chapter 11 filing with the Bankruptcy Court for the Southern District of New York.
Revlon said it has arranged $575 million in so-called 'debtor-in-possession' financing that will support its day-to-day operations in the U.S. Revlon's international subsidiaries were not involved in the filing, the company said.
Revlon said last month it had around $70 million in cash as of the end of March, with access to $65 million in borrowing capacity under a 2016 credit facility.
“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 CEO Debra Perelman. “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 recognized brands," she added. "We are committed to ensuring the reorganization is as seamless as possible for our key stakeholders, including our employees, customers and vendors, and we appreciate their support during this process.”
Revlon shares were marked 4.44% lower in premarket trading to indicate an opening bell price of $2.15 each, a move that would extend the stock's year-to-date decline to around 81%.
Revlon had a market cap of $1.4 billion in October of 2019, today's move would peg it at around 59 million..
Last month, the group said it was hoping to "ensure sufficient liquidity to support both our growth and our capital structure" as it faced supply chain headwinds and other "emerging macroeconomic challenges that continue to impact businesses across most industries."
Perelman, the daughter of billionaire financier Ron Perelman, told investors on May 7 that "lack of availability or long lead times for raw materials and components, along with shortages and delays across all modes of transportation, are resulting in reduced", adding that "we are faced with rising costs due to global inflation putting pressures both on consumers' wallets as well as on our margins."
Revlon posted an 8% rise in net sales, to $445 million, for the three months ending in March, and swung to a modest operating profit of $24 million thanks to improving gross margins and lower restructuring charges.
