Some lenders organized with law firm Arnold & Porter Kay Scholer, while bondholders have been working with Stroock & Stroock & Lavan, Bloomberg reported in April. The company is getting advice from attorneys at Paul Weiss Rifkind Wharton & Garrison and investment bank PJT Partners Inc.
Retail Holders
Some large institutional investors support Revlon’s restructuring efforts, but the company is having difficulty completing an exchange because a chunk of the bonds are held by mom-and-pop buyers who are less familiar with the swap process, the people said. The company created a website asking investors to turn in their holdings and included stark warnings about the firm’s future.
“If you do not act now to participate in the company’s pending exchange offer, repayment of your notes will be at risk,” the company said in a letter signed by CEO Perelman and posted on the website.
Investors must weigh whether to swap their holdings for as little as 27.5 cents on the dollar or risk the uncertainty of a bankruptcy. The debt last traded around 27.25 cents, according to Trace.
“Bondholders would recover very little, if anything, in the event of a bankruptcy,” JPMorgan Chase & Co. research analyst Carla Casella said in an interview.
Holders must turn in their bonds by Nov. 10, though terms of the deal are better if they do so by Nov. 5. In the latest version of the exchange, Revlon removed a 95% participation minimum in favor of a requirement that it must maintain at least $175 million in liquidity to close the deal.
Either way, if any of the notes remain outstanding by mid-November, it will trigger the broader loan repayment. Revlon estimates total liquidity was around $347 million as of October 16, including available credit plus around $267 million of unrestricted cash, documents show.
If the swap falters, a decision about a potential filing could come around the Nov. 10 final deadline, the people said. The company would also weigh factors like its recent financial performance and cash on hand to fund operations, they added.
A successful exchange would give Revlon more time to focus on its turnaround. Even before the pandemic dented makeup demand as people stayed home, the company was struggling to compete with Estee Lauder Cos. and social media savvy makeup startups. Its products are carried in stores like Walmart Inc., CVS Health Corp. and Macys Inc. at a time when shoppers are increasingly migrating to specialty retailers like Sephora USA Inc. and direct-to-consumer brands like Glossier Inc. for makeup purchases.
Revlon has been seeking to exchange its 5.75% notes due 2021 since July, and sought feedback from creditors after an initial proposal drew just 5% participation, the people said. The latest offer amended certain terms to avoid the potential for select investors to strike side deals with the company outside the exchange, documents show. Bondholders can receive cash or a combination of cash and new loans.