Revlon investors ask court to appoint official equity committee

By Sarah Lizee

Olympia, Wash., Aug. 10 – An informal group of Revlon, Inc.’s public investors are seeking appointment of an official committee of non-insider equity holders, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

The group said the market for Revlon’s publicly traded stock indicates that there is significant equity value in the debtors, and as such, there is no credible argument that the debtors appear to be “hopelessly insolvent.”

Revlon’s stock price has more than quadrupled in value since the petition date, rising from $1.95 per share on June 16 to $8.38 per share on Aug. 9, representing an equity market capitalization of about $457 million.

“While the debtors may attempt to dismiss the need for an official equity committee by seeking to characterize Revlon as a ‘meme’ stock whose trading price is disconnected from its underlying business performance, the court should not permit the debtors or their advisors to substitute their ‘instinct’ for the free market,” the group said.

The group also noted that demand for the debtors’ products is strong and growing, and that the purpose of the Chapter 11 cases is to address a liquidity shortfall caused by supply chain disruptions, which is a temporary problem.

“Notwithstanding these clear indications of solvency, the prospect of an equity recovery is at risk absent the appointment of an official equity committee,” the group said.

The bankruptcy code permits the court to appoint an official equity committee in cases where it is necessary to counteract the natural “favoritism to creditors in the plan formulation process.”

“The risk of unwarranted ‘favoritism’ abounds,” the group said. “For example, the BrandCo lenders – the beneficiaries of the disputed 2020 BrandCo financing – have significant control through the DIP’s case controls, which may create incentives for the debtors to align with the BrandCo lenders at the expense of equity.”

The group said that, absent official representation, equity holders will be effectively shut out of the process, through a practical lack of access to management and other necessary resources from the debtors, or through simple attrition.

A hearing is scheduled for Aug. 24.

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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