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Revlon’s Refinancing Faces Uncertainty

An agreement has yet to be finalized for Revlon's refinancing.

Lender squabbles mean that Revlon Inc. hasn’t yet been able to go through with the refinancing plan the beauty company unveiled in March.

Discussions around Revlon’s plan have been ongoing since March, when the company unveiled its plan for new loans from Jefferies that would replace facilities with looming maturity dates.

In order for the new facilities to go through, 50 percent of existing lenders need to agree to the deal. One industry source said the group does not want the facility to go through because it would put them in a “very junior position.”

An agreement was expected to be reached as soon as April 23, but the source put the likelihood at “maybe, maybe not,” and suggested that if it doesn’t close Thursday, the date would likely be extended. Debtwire first reported that the deadline for an agreement had been moved from April 17 to April 23.

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A different source with direct knowledge of the negotiations said, “We’ve had great momentum since the launch. Currently in constructive dialogue with many additional holders and expect to be well in excess of 50 percent by the deadline.”

As of April 14, the agreement has Jefferies Finance LLC providing three senior secured term loans: one for $850 million that would be used to pay off the $200 million term loan Revlon got from Ares in 2019 that’s secured by American Crew, as well as for expenses related to refinancing and general corporate purposes; another for $950 million in order to roll up loans from a 2016 facility, and a third for an undetermined amount that existing lenders could participate in if they consent to the deal. Existing lenders are also being asked to buy into the $950 million loan. All three facilities would mature on June 30, 2025.

The $950 million loan would be secured by the intellectual property of Elizabeth Arden, American Crew and certain other brands. The deal would move certain assets into a Revlon subsidiary called BrandCos. Products Inc., and then brands would enter into licensing and royalty agreements to use those assets.

As of March 27, Revlon had $115 million in cash on hand, and if the Jefferies financing closes, the company expects to have enough money to continue operating “for at least the next 12 months,” according to a filing with the Securities and Exchange Commission.

Revlon has struggled in recent years with slumping sales. All segments except Elizabeth Arden have been down recently.

At the same time as it revealed the refinancing plan, Revlon also said it would implement a restructuring plan that included layoffs. Of the $200 million to $230 million that the company hopes to save by the end of 2022, 60 percent will be coming through headcount reductions. Revlon was hit further by the coronavirus crisis, and asked some employees to work reduced hours for less pay, while furloughing others.

Before the financing agreement was in place, Revlon hired Goldman Sachs to explore deal options for all or parts of the company. Sources had said Revlon would have used proceeds from selling off brands to pay down existing debt.

For more from, see: 

Revlon Restructuring Plan Includes Significant Layoffs

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P&G Sales Jump During Coronavirus but Beauty Slows