- Law firms
- Related documents
- Unsecured creditors oppose bankruptcy financing terms
- Creditors say a lender coalition is asserting too much control over the bankruptcy
- Revlon's true value cannot be determined for months, creditors say
(Reuters) - Revlon Inc is facing pushback to its proposed $1.4 billion bankruptcy loan, with its official creditors committee opposing the loan and calling the cosmetic company’s case a “mess” in a Wednesday court filing.
The bankruptcy financing would hand too much power to a coalition of lenders, which hold about half of the company’s $3.5 billion debt, at a time of great uncertainty about the company’s future and who should control it, the creditors committee said in a filing in the U.S. Bankruptcy Court for the Southern District of New York.
"No one today knows what Revlon is worth," and the lender coalition's proposed financing is an effort to "seize the company before its value has been determined," the committee wrote.
Revlon filed for Chapter 11 in June, saying its high debt load left it too cash-poor to make timely payments to critical vendors in its cosmetics supply chain. It began its bankruptcy case by borrowing $375 million from the lender coalition, and it will seek approval of the rest of the loan at a bankruptcy hearing next week before U.S. Bankruptcy Judge David Jones.
The lender coalition known as the BrandCo Lenders, includes private equity and hedge funds such as Ares Management and Oak Hill Advisors.
The creditors committee argued in Wednesday's filing that the same lender coalition has already “fleeced” other Revlon creditors in a 2020 transaction that allowed Revlon to take on more debt while transferring its brands and intellectual property assets to a different Revlon subsidiary.
There are doubts about whether Revlon's value exceeds the company’s debt, and a clearer picture will only emerge after the company’s 2022 holiday sales, the committee argued.
But the strings attached to the bankruptcy loan will not allow creditors time to evaluate the company's worth or untangle the intercreditor disputes, instead requiring the company to exit bankruptcy by April 2023 and giving the BrandCo lenders veto rights over any reorganization plan, according to the committee.
Revlon and the Brandco lenders could not immediately be reached for comment.
The 2020 transaction was the subject of litigation that took an unexpected twist when Citibank accidentally paid off the entirety of the $894 million 2016 loan. But Citibank is attempting to recoup the mistaken payment, which could revive the 2016 lenders’ fight over the intellectual property collateral that was transferred in 2020.
The case is In re Revlon Inc, No. 22-10760, in the U.S. Bankruptcy Court for the Southern District of New York.
For Revlon: Paul Basta, Robert Britton and Alice Eaton of Paul, Weiss, Rifkind, Wharton & Garrison
For the creditors' committee: Robert Stark of Brown Rudnick
For the ad hoc committee of BrandCo Lenders: Eli Vonnegut
of Davis Polk & Wardwell and Danielle Rose of Kobre & Kim
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