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Revlon, popular cosmetics company, has filed for bankruptcy in the United States, claiming that supply chain interruptions have increased the cost of raw ingredients for its products. Supplier payments, inflation, and labor shortages, according to the 90-year-old company.
To fund day-to-day operations, the company hopes to obtain $575 million (£466.6 million) from existing lenders. The company’s stock dropped more than 13% after the revelation in New York trading.
The company said in a court filing that supply chain problems had sparked fierce rivalry for the components used in its cosmetics. Suppliers have also requested advance payment for orders, according to the report. According to the filing, this has resulted in “shortages of critical ingredients across the company’s portfolio.”
In addition to the Revlon brand, the firm owns Elizabeth Arden, Almay, and Cutex, as well as fragrances headlined by Christina Aguilera and Britney Spears.
It has seen growing competition in recent years from new businesses such as Kylie Jenner’s Kylie Cosmetics and Rihanna’s Fenty Beauty, which are endorsed by celebrities.
Revlon will be permitted to continue operating while negotiating a repayment plan with its creditors after filing for Chapter 11 bankruptcy protection in the United States.
Debra Perelman, Revlon’s president and CEO, said the bankruptcy filing will allow the firm to “give our customers the iconic products we’ve delivered for decades while giving a clearer route for our future growth.” The New York Stock Exchange, on the other hand, announced on Thursday that it had begun the process of removing the company’s shares from its platform.
Revlon warned earlier this year that it was suffering “liquidity restrictions” due to “continuing global issues, including supply chain disruption and rising inflation.” It had $3.3 billion in long-term debt at the end of March, and news of its approaching bankruptcy last week sent its stock plummeting.
Reasons for the insolvency
One of the concerns facing Revlon is a contested asset transfer that occurred in 2020 when the company avoided default by striking a deal with lenders that transferred property out of the reach of other creditors. The financing scheme enraged individuals who were left out and resulted in years of litigation. It also unwittingly ensnared Citigroup Inc. when the bank assisted in the deal’s arrangement and later paid some creditors roughly $900 million while processing a normal interest payment.
That was one of the industry’s most infamous blunders, leading to ongoing legal battles over who owns the $500 million that receivers did not refund.
Brief History of Revlon
Charles and Joseph Revson, along with Charles Lachman, founded Revlon in 1932 and began selling nail polish soon after. It had become an international brand by the mid-1950s. In 1985, billionaire businessman Ronald Perelman’s MacAndrews & Forbes purchased it. Revlon presently has a global presence in more than 150 countries.