Revlon shareholders seek official representation in bankruptcy case

Revlon signage is seen on display in a Boots store in London, Britain, June 16, 2022. REUTERS/Hannah McKay
  • Shareholder group fears lenders will squeeze out equity value
  • They say Revlon is more than a "meme stock"
  • Revlon equity shares have quadrupled in price since the company's bankruptcy began

(Reuters) - A group of Revlon Inc shareholders on Tuesday asked a bankruptcy judge to give them a greater voice in the cosmetics company's bankruptcy, saying no one else can be trusted to speak up for minority equity owners.

The shareholder group, led by investment advisor and Revlon minority shareholder Mittleman Brothers LLC, said that Revlon's equity continues to increase in value despite the bankruptcy filing, showing that Revlon's business remains sound and shareholders could be "in the money" if their interests are protected. The shareholders asked U.S. Bankruptcy Judge David Jones in Manhattan to appoint an official committee to represent minority shareholders.

Revlon did not immediately respond to a request for comment.

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Revlon filed for Chapter 11 in June, saying its $3.5 billion debt load left it too cash-poor to make timely payments to critical vendors in its cosmetics supply chain.

Revlon shares have quadrupled in value since the bankruptcy filing, rising to $8.38 per share as of Tuesday afternoon from $1.95 per share on June 16, representing an equity market capitalization of $457 million, the shareholders said.

Shareholders often have their equity wiped out in bankruptcy cases, but the recent bankruptcy of Hertz Inc showed that shareholders can retain significant value when a bankruptcy is brought on by short-term, solvable problems, the shareholders said in a court filing.

Hertz, like Revlon, was initially dismissed as a "meme stock," with skeptics attributing its price increase to retail investors placing irrational bets on a company that has received social media attention. But Revlon is more than a "meme stock," it is "an iconic, 90-year old American brand that is simply facing short-term liquidity issues as a result of the COVID-19 pandemic," the shareholder group wrote.

Without a greater voice in the bankruptcy case, Revlon may show "favoritism" to other creditors who have a stake in the case, particularly a group known as the BrandCo lenders, who offered Revlon a $1.4 billion loan to shore up its supply chain and carry out a Chapter 11 restructuring, the shareholders said.

Jones approved that loan on Aug. 1, over objections from junior creditors who raised concerns about the power it gave to the BrandCo lenders.

The shareholders asked Jones to rule on their request at an Aug. 24 court hearing. Official equity committees are rarely approved in bankruptcy cases.

The case is In re Revlon Inc, U.S. Bankruptcy Court for the Southern District of New York, No. 22-10760.

For Revlon: Paul Basta, Robert Britton and Alice Belisle Eaton of Paul, Weiss, Rifkind, Wharton & Garrison

For the minority shareholders: Thomas Lauria and Gregory Pesce of White & Case

For the ad hoc committee of BrandCo lenders: Eli Vonnegut

of Davis Polk & Wardwell; and Danielle Rose of Kobre & Kim

Read more:

Revlon files for bankruptcy, blames supply chain snags

Citigroup urges appeals court to hit 'rewind' after Revlon blunder

Revlon borrows $375 million in bankruptcy to shore up supply chain

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Reporting by Dietrich Knauth

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