Revlon’s disclosure statement draws objections from lenders, trustee

By Sarah Lizee

Olympia, Wash., Jan. 26 – Revlon, Inc.’s disclosure statement for its Chapter 11 plan drew objections from an informal group of 2016 term loan lenders and note trustee U.S. Bank, NA, according to documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The term loan lender group said the disclosure statement cannot be approved because the plan’s “gerrymander scheme” is impermissible and deprives the lenders rights as secured creditors.

The group said its claims should not be classified together with BrandCo lender claims because the claims are “vastly dissimilar.”

“The proposed classification is a transparent attempt by the debtors and BrandCo lenders to improperly avoid the cramdown requirements of bankruptcy code section 1129(b),” the group said in its objection.

Generally, a reorganization plan can only be confirmed with the assent of each class of impaired creditors. In a cramdown scenario, a plan can be confirmed despite rejection of an impaired class, provided that it complies with bankruptcy code requirements that the plan does not discriminate unfairly and that the plan is fair with respect to a dissenting class.

“If the 2016 term loan claims were separately classified from the BrandCo lender claims (as they should be), the 2016 term loan claims class would vote against the plan and the debtors would be required to seek confirmation with respect to such class via cramdown pursuant to bankruptcy code section 1129(b),” the group said.

“In other words, in order to cram the plan down on the 2016 term loan lenders, the debtors are required to issue replacement debt instruments on account of the 2016 term loan claims or otherwise provide the ‘indubitable equivalent.’”

Instead, the debtors are proposing to provide holders of 2016 term loan claims in consideration only in the form of equity and rights to purchase equity.

“Equity in a reorganized debtor is never the ‘indubitable equivalent’ of secured creditors’ claims,” the group said.

Meanwhile, notes trustee U.S. Bank said the disclosure statement shouldn’t be approved because it doesn’t give enough information to class 8 unsecured notes creditors for them to make an informed choice to approve or reject the plan.

The disclosure statement provides that a document critical to the treatment of class 8, the new warrant agreement, will only be disclosed seven days prior to the voting deadline.

Also, this class will likely be required to vote prior to the voting deadline, thus giving them even less than seven days to review the document.

The disclosure statement also drew an objection from Region 2 U.S. trustee William K. Harrington, who took issue with the plan’s releases, as previously reported.

The disclosure statement hearing is set for Feb. 8.

The hair color products and cosmetics company is based in New York. The company filed bankruptcy on June 15, 2022 under Chapter 11 case number 22-10760.

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