Revlon Collectors Problem 2020 Mortgage Transactions

A few of Revlon’s collectors have requested a US chapter choose in Manhattan to unwind the bankrupt beauty big’s 2020 mortgage restructuring, saying {that a} group of senior lenders fleeced different collectors by improperly laying declare to the corporate’s worthwhile mental property property.

The collectors, together with Brigade Capital and Nuveen Asset Administration, in a court docket submitting late Monday accused a separate faction of lenders, referred to as the Brandco lenders, of exerting huge leverage over Revlon’s chapter proceedings based mostly on “sham” mortgage transactions made in 2019 and 2020.

If profitable, their problem might eradicate the Brandco lenders’ proper to assert Revlon’s manufacturers as their unique collateral, lowering the Brandco lenders’ leverage within the chapter.

Each lender teams participated in a $2 billion mortgage that Revlon used to buy Elizabeth Arden in 2016. However the Brandco lenders, which embody personal fairness and hedge funds equivalent to Ares Administration and Oak Hill Advisors, then loaned Revlon further cash and claimed extra of Revlon’s property as collateral, in violation of the 2016 mortgage settlement, in response to the submitting.

Revlon and an legal professional for the Brandco lenders didn’t instantly reply to a request for remark. Ares declined to remark.

When Revlon filed for chapter in June, the Brandco lenders held about $1.88 billion of Revlon’s $3.5 billion debt. They loaned the corporate one other $975 million to fund the Chapter 11 case.

By transactions in 2019 and 2020, Revlon transferred logos and different mental property rights related to its magnificence manufacturers, together with Elizabeth Arden, Almay and Roux, to newly created subsidiaries which took on further, higher-priority debt than the corporate’s present money owed.

These transactions allowed Revlon to borrow an extra $880 million in 2020 from the Brandco lenders, in response to the grievance.

The objecting lenders beforehand sued the Brandco lenders, however their lawsuit was sidetracked when Revlon’s financial institution, Citibank, mistakenly made a $900 million fee on the 2016 mortgage whereas making an attempt to course of a $7.8 million curiosity fee.

Revlon has mentioned it’s exploring a sale of the corporate as a possible exit from Chapter 11. The corporate is working to succeed in a preliminary restructuring settlement with its Brandco lenders by mid-November.

By Dietrich Knauth; Editors: Alexia Garamfalvi and Ed Osmond

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What Went Fallacious at Revlon

It was a sluggish decline for the 90-year-old firm, which discovered itself crippled by huge debt, a pandemic, provide chain points and rising competitors from start-up manufacturers altering magnificence beliefs and tradition.