By: Benyamin Davidsons
Revlon, the beauty giant controlled for several decades by Ronald Perelman, has minority shareholders concerned they won’t be heard in the Chapter 11 proceeding.
As reported by the Wall Street Journal, a group of Revlon Inc. stockholders are complaining that their shares in the bankrupt beauty supply company will get the short end of the stick, being dwarfed by Perelman, the billionaire controlling shareholder, in the chapter 11 case. On Tuesday, the shareholders asked the government lawyers to appoint an official committee to represent the equity holders’ interests in Revlon’s bankruptcy case.
They pointed to the unexpected rally in its stock price last month, which followed the company’s announcement to file for bankruptcy. The group claims that the stock may have material value, but that their interests won’t be represented. In a letter last week to a Department of Justice bankruptcy watchdog, the holders say Revlon’s stock price suggests “equity is significantly in the money”. The letter adds, “However the prospect of an equity recovery is at risk because the BrandCo lenders are clearly in the driver’s seat of the chapter 11 cases,” adding that the lenders “are intent on acquiring Revlon’s core assets on the cheap during a market trough”. The letter asked the watchdog, known as the US Trustee, to make a decision on an equity committee on time so the group could potentially appear in court for the company’s July 22 hearing on the financing.
As per Bloomberg News, the minority group which owns about 12.8% of Revlon shares not held by Ron Perelman, is being represented by Thomas Lauria with law firm White & Case. The group isn’t affiliated with Perelman, whose holding company MacAndrews & Forbes owns roughly 85% of the beauty giant. The 79-year-old billionaire, whose holding company acquired Revlon in the 1980s, has a net worth of about 2.8 billion as of 2022, down drastically from $19.8 billion in 2018. Revlon filed for bankruptcy in June, due to high debt load, supply chain problems and competition from upstart beauty brands.
Stocks of Revlon rallied after the bankruptcy, led by retail stock traders. Last month, on the day of the filing, shares were trading at roughly $2.25 per share, and jumped to a high of $8 the following week. The stock was still trading at about $5.54 on Tuesday afternoon, having almost tripled since the June 16 bankruptcy filing. Common equity is usually all lost when a company reorganizes in bankruptcy, but that’s not always the case.
In rare cases, like Hertz Global Holding Inc.’s Chapter 11 case , shareholders can have some recovery. Their attorney, Lauria had previously successfully represented Hertz during their insolvency proceedings. As per Bloomberg, in order for Revlon to repay its creditors in full and offer equity holders any potential recovery, it would need to be bought out of bankruptcy for about $4 billion.
