NEW YORK, USA – US Bankruptcy Judge David Jones in New York approved Revlon’s proposed bankruptcy loan on an interim basis after hearing testimony that Revlon was down to $6 million in cash and struggling to fulfill retail customer orders.
Revlon chief restructuring officer Robert Caruso testified Friday, June 17, that most of Revlon’s raw material vendors have stopped sending shipments, and many were demanding payment of past debts or deposits on future deliveries.
Without access to raw materials, Revlon cannot meet sales demands, leaving the company with dwindling cash to solve its supply problem, Caruso added. The company is currently able to fill 70% of customer orders without backlog or cancellations, compared to an industry standard of 90% to 95%, Caruso said.
In a worst-case scenario, Revlon could also face impacts into 2023, since retailers are going to be making long-term decisions in September about which products to stock, Caruso said.
“That will play a big role in how customers think about resetting store shelves for next year,” Caruso said in court. “If we are not able to get the money in and restore our supply chain and meet our customer orders, we will have a lot of harm to the business.”
Revlon will retain about $300 million of the initial bankruptcy loan for day-to-day business purposes, and use $75 million to pay down debts at foreign subsidiaries who are not part of the US bankruptcy, Caruso said.
Revlon has lined up $575 million in total funding for its bankruptcy case, and it will seek approval for the remaining $200 million at hearing next month.
Revlon junior creditors and the US Department of Justice’s bankruptcy watchdog raised concerns about some of the terms of that loan, focusing on fees paid to lenders and the potential to reorder the priority in which the company’s lenders would be paid.
Judge Jones deferred potential fights over the loan terms, saying that he would allow junior creditors to raise objections before giving final approval to the loan. Jones said he too would have preferred a “better and less problematic” lifeline for Revlon, but he was convinced that the proposed loan was the best option available to the company.
Revlon filed for Chapter 11 protection late Wednesday, June 15, saying supplier demands impacted its ability to pay interest on $3.5 billion in company debt. – Rappler.com