Image Source: Pricee
Revlon cosmetics has filed for bankruptcy in the United States, citing supply chain interruptions as a factor in rising raw material costs. Supplier payments, inflation, and labor shortages have also been cited as issues for the 90-year-old company.
To fund day-to-day operations, the company anticipates receiving $575 million (£466.6 million) from its existing lenders. Following the revelation, its stock dropped by more than 13% in New York trading.
According to a court document, supply chain interruptions have resulted in severe rivalry for the components used in the company’s cosmetics. In addition, according to the report, suppliers have also requested payment for items in advance. According to Revlon’s chief restructuring officer, Robert Caruso, this has resulted in “shortages of critical ingredients across the company’s portfolio.”
In addition to the Revlon brand, the firm owns Elizabeth Arden, Almay, and Cutex, as well as fragrances with Christina Aguilera and Britney Spears as spokespersons. New brands supported by celebrities, such as Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty, have intensified rivalry in recent years.
Revlon will be able to keep operating while working out a plan to repay its creditors by filing for Chapter 11 bankruptcy protection in the United States.
Debra Perelman, Revlon’s president and CEO, stated that the bankruptcy filing will allow the firm to “provide our customers the iconic products we have given for decades while offering a clearer route for our future growth.” The New York Stock Exchange, on the other hand, announced on Thursday that it had begun the process of delisting the company’s stock from its exchange.
Revlon announced earlier this year that it was experiencing “liquidity restrictions” due to “continuing global problems, such as supply chain disruption and rising inflation.” At the end of March, the company owed $3.3 billion in long-term debt, and news of its probable bankruptcy plummeted its stock.
Why is Revlon Cosmetics filing for bankruptcy?
One of the difficulties Revlon cosmetics is dealing with is a contested asset transfer that occurred in 2020 when the company avoided default by striking a deal with lenders that transferred property out of the grasp of other creditors. Those who were left out were enraged, and the financing scheme resulted in years of legal battles. It also unwittingly entangled Citigroup Inc. when the bank assisted in the deal’s structuring and later paid some debtors roughly $900 million while processing a normal interest payment.
That was one of the industry’s most infamous blunders, which resulted in ongoing legal battles about who owned the $500 million that receivers didn’t refund.
Brief History of Revlon Cosmetics
Charles and Joseph Revson, along with Charles Lachman, founded Revlon cosmetics in 1932 and began selling nail polish shortly after. It had become a worldwide brand by the mid-1950s. MacAndrews & Forbes, owned by Ronald Perelman, a billionaire businessman, purchased it in 1985. Revlon presently has over 150 countries where its products are sold.