Source : 'HBW Insight'
Revlon, Inc. has staved off bankruptcy with a hard-won exchange offer with investors, giving the company additional time to turn around its beleaguered business.
According to its 13 November announcement, Revlon compensated holders at discounted rates for close to 70% of $343m in senior notes due 2021, and successfully redeemed those outstanding.
The swap’s completion, just under the wire, means that Revlon will avoid facing more than $1bn in additional obligations that would have been triggered by a default, according to online sources.
“As a result, the Company does not expect that any bankruptcy or insolvency proceeding will be necessary,” Revlon said.
The New York-based company approached bondholders in July and met with resistance over repeated deadline extensions before warning in October that Chapter 11 restructuring may be necessary if participation thresholds in the proposed debt exchange were not reached.
"I am confident that with the successful exchange offer essentially behind us, our strategic plan well underway and our portfolio of iconic brands, there remains a bright future ahead for Revlon." – Debra Perelman
Revlon’s business, in particular its namesake brand, has been struggling for the better part of a decade, and COVID-19 certainly has not helped. ()
Prior to the pandemic, the New York-based company was relying heavily on Elizabeth Arden – acquired in 2016 to fill the prestige beauty gap in its portfolio – to offset declining sales in its Revlon, Fragrance and Portfolio divisions. ()
In fiscal 2019, Revlon’s total net sales declined 5.7%, reported, to roughly $2.4bn. Elizabeth Arden was the only unit that grew (+7.5%) in the fiscal 2019 fourth quarter, the firm reported in March.
Fast forward to the company’s fiscal 2020 third quarter, ended on 30 September, and all four of Revlon’s business segments recorded double-digit sales decreases, dragging down overall sales approximately 20% to $477.1m, according to its 12 November release.
Revlon attributes the result to retail channel closures and light foot traffic in stores due to COVID-19. If not for those effects, the firm estimates that its net sales would have been roughly flat for the quarter.
During a same-day briefing with analysts, president and CEO Debra Perelman, daughter of chairman Ronald Perelman, noted that the Q3 sales performance represents a sequential improvement versus the near-40% net sales decline Revlon recorded in the second quarter. ()
E-commerce sales, which grew 13% in the third quarter, accounted for 12% of the firm’s overall sales, up three points from the prior-year period.
Perelman explained that the Q3 digital sales growth lagged behind that in previous quarters due to one-time events in the Asia mass channel in the third quarter of fiscal 2019, including the e-commerce launch of Revlon color cosmetics into China.
“Excluding our mass brands in Asia, our total e-commerce net sales would have grown just under 40% relative to the prior-year quarter,” she said.
Further, the CEO is encouraged that the company’s bottom line remains steady following cost-cutting measures implemented to mitigate COVID impacts. Revlon reported a net loss of $44.5m in the third quarter versus a $44.7m loss in the prior-year period. ()
Perelman said the closure of Revlon’s senior notes debt exchange offer will provide the company with additional runway to enter 2021 fully focused on strategic execution.
“Of course, the hard work is not over and there is still uncertainty ahead due to COVID-19. But I am confident that with the successful exchange offer essentially behind us, our strategic plan well underway and our portfolio of iconic brands, there remains a bright future ahead for Revlon,” she said.
By Ryan Nelson