Revlon creditors object to DIP loan, call bankruptcy case a ‘mess’

By Sarah Lizee

Olympia, Wash., July 20 – Revlon, Inc.’s official committee of unsecured creditors objected to the company’s proposed debtor-in-possession financing package and expressed several concerns with the Chapter 11 case in general in court documents filed with the U.S. Bankruptcy Court for the Southern District of New York on Wednesday.

“Revlon’s Chapter 11 case is one of the largest and most important bankruptcies in America. It initiated as a ‘free-fall’ case and, today, is a mess,” the committee said.

The group said no one knows what Revlon is worth, as a total business enterprise or as an aggregation of business sub-units.

“The bankruptcy was rushed by an acute liquidity problem,” the group said, noting that the company hasn’t announced a reorganization strategy, started an organized sale process, or published a long-range business plan.

The committee also said the company has “one of the most convoluted ‘value-allocation’ dilemmas ever in the history of Chapter 11.”

Two years prior to its bankruptcy, Revlon changed its capital structure, moving the intellectual property out of its corporate entities and into new special-purpose subsidiaries, known as the BrandCos. The BrandCos then guaranteed new debt collateralized by the IP.

“The move fleeced unsecured creditors at the legacy Revlon companies for the benefit of the new BrandCo lenders, some of whom simply ‘traded up’ their legacy debt position into this new BrandCo debt,” the group said.

The committee claims the maneuver was in violation of prepetition lending arrangements, prompted substantial prepetition litigation, and raises “a host of issues” for the bankruptcy case.

“This is the prism through which the court must look at the debtors’ proposed term DIP loan,” the committee said.

The financing is being provided by some of the BrandCo lenders, who are now the target of estate litigation related to fraudulent transfer and equitable subordination.

The committee said the lenders are motivated to front-run the Chapter 11 process, dismantle the adversary process, and seize the company before its value has been determined.

The group said the proposed DIP financing narrowly constricts time and funding for a reasonable investigation and an orderly presentation of issues to the court.

“If the objective of Chapter 11 is thoughtful, reasoned negotiation towards a fully consensual resolution, this is no way to go about it,” the group said.

The hair color products and cosmetics company is based in New York. The company filed bankruptcy on June 15 under Chapter 11 case number 22-10760.

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