The American cosmetics giant Revlon has declared bankruptcy this Wednesday night, unable to meet its debts of 3,700 million dollars (about 3,500 million euros). The company, owned by billionaire Ron Perelman, has filed for bankruptcy protection (called Chapter 11 in the United States) in a New York court.
For a few days there was speculation about the possibility that the company would suspend payments and the shares have been on a roller coaster for a week. Last Friday the price suffered a record drop of 52%, followed by another 42.5% this Monday. On the other hand, on Tuesday a rise of 60% was noted and the rebound continued this Wednesday, with a recovery of 20.8%. Still, as a whole, the shares have gone from $4.07 to $2.16 in four sessions. The market capitalization or value of the company on the stock market has sunk to only 123 million dollars.
The company declares that it has assets of 2,300 million dollars, insufficient compared to its debts of 3,700 million. The company closed the 2021 financial year with a turnover of 2,079 million dollars and losses of 207 million. The previous year it lost more than 600 million and has been in the red for several years.
The pandemic hit the company’s sales hard, which has also been shaken by problems in the supply chain and by strong inflation, which has raised its costs more than it has been able to grow sales. In addition, it has been losing ground at the hands of new brands that are more active on social networks and with style references.
The bankruptcy procedure allows the company to continue operating while it restructures its liabilities. The company had been unable to refinance its debt. Ron Perelman is the president of the company and Debbie Perelman, the daughter he had with the first of his five wives after adopting three other children, is the CEO, the first woman to access that position in the 90-year history of the company.
Revlon was founded in New York in 1932, in the midst of the Great Depression, by two Jewish brothers of American origin, Charles Revson and Joseph Revson, together with the chemist Charles Lachman, from whom the company’s name comes. Their founding product was an innovative nail polish that was hugely successful. She later added lipstick to her manicure products. After World War II it was already the second largest producer of cosmetics in the United States. International expansion and an acquisition race began that turned the company into a global cosmetics giant.
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Perelman’s holding company, MacAndrews & Forbes, bought Revlon in a controversial deal in 1985, financing the deal with low-quality debt with the help of Michael Milken, the king of junk bonds. That debt weighed down the company for years. But when the company was healthier, it was launched in 2016 to buy Elizabeth Arden, again financing the operation with debt.
Since then he has been saving his financial commitments as best he could. Perelman himself has on occasion been busy pumping money into the company to stave off bankruptcy. Until this time.
In 2020 and 2021 it was the subject of a high-profile financial mishap when Citigroup mistakenly transferred nearly $900 million of its own funds, instead of paying $7.8 million in interest to creditors of the Revlon company. Part of those who received the money, which constituted the principal of the loan, instead of the interest, sued to keep the funds and a court agreed with them, generating losses of some 500 million dollars for Citigroup. The court ruling is appealed.
