Revlon begins exchange offers for 8 1/8%, 9% and 8 5/8% notes

New York, Feb. 23 - Revlon Inc. said that it had begun offers to exchange Class A common stock or cash for its 8 1/8% senior notes due 2006, its 9% senior notes due 2006 and its 8 5/8% senior subordinated notes due 2007, on terms previously outlined when the company unveiled a sweeping program of planned debt-reduction efforts.

Revlon said that the exchange offers would expire at 5 p.m. ET on March 19, subject to possible extension.

The company said there is no limit on the amount of notes that may be exchanged for Class A common stock.

Revlon said that each of the exchange offers is independent of the other exchange offers. None of the exchange offers is conditioned upon the exchange of a minimum principal amount of 8 1/8% notes, 9% notes or 8 5/8% notes being tendered for exchange, but is otherwise subject to certain customary conditions, including shareholder approval of the issuer of the additional shares to be exchanged for the notes.

As previously announced, the New York-based cosmetics company said on Feb. 12 that it planned to eliminate some $930 million of debt - roughly half of the company's debt load - by March 2006, including at least $780 million of debt to be exchanged under the current offers.

Revlon's wholly owned Revlon Consumer Products Corp. subsidiary has outstanding some $250 million of the 8 1/8% notes issued in January 1998, $250 million of the 9% notes issued in November 1998 and $650 million of the 8 5/8% notes issued in January 1998 for a total principal amount of $1.15 billion.

Some of the notes are in the hands of Revlon Inc.'s 83% owner MacAndrews & Forbes, the investment vehicle for Revlon chairman Ronald O. Perelman. Others are in the hands of Fidelity Management & Research Co. - an institutional investor taking part in the exchange offer - while the remainder is in the hands of independent bondholders.

Revlon said that as the first step, it reached agreements with MacAndrews & Forbes and with Fidelity, under which they have agreed to tender to Revlon a total of $630 million of debt, consisting of some $440 million of the publicly traded bonds - $285 million held by MacAndrews & Forbes and $155 million held by Fidelity - and about $190 million of other debt - loans, non-public bonds and other debt held by MacAndrews & Forbes.

Revlon agreed to exchange its Class A common shares, par value of 1 cent per share, for their public bond holdings, offering 400 shares per $1,000 principal amount of the 8 1/8% and 9% notes and 300 shares per $1,000 principal amount of the 8 5/8% notes.

The company is seeking to buy back at least $150 million of the bonds held by the other bondholders, offering them either Class A common shares on the same terms granted MacAndrews & Forbes and Fidelity, or cash for their bonds.

Should they choose the cash option, holders would receive $830 per $1,000 principal amount of 8 1/8% notes tendered for exchange and accepted by the company for cash payment; $800 per $1,000 principal amount of 9% notes tendered and accepted; and $630 per $1,000 principal amount of the 8 5/8% notes tendered and accepted. Whether they opt for the debt-for-stock swap or elect the cash offer, the other bondholders will have the option of receiving their accrued interest in cash or in additional common shares.

Revlon said that it would accept for cash payment up to a maximum of $150 million principal amount of the bonds held by the other bondholders but added that the amount it would ultimately accept under this cash payment option would be lowered by the amount of bonds tendered for exchange into equity.

For instance, should the other holders tender $150 million of bonds for cash payment but also tender $100 million in exchange for stock, Revlon will accept no more than $50 million of the bonds tendered for cash, allocating them on a pro rata basis; holders who tendered for cash would be given the option of switching everything over the pro rata amount to the debt-for-equity option or withdrawing those tenders.

Revlon said that should the exchange offers to the other bondholders be subscribed above the $150 million level, Revlon plans to accept their tenders, and lower by a corresponding amount the additional $150 million minimum amount of funds that it envisions raising from a $50 million rights offering projected to take place by the end of this year and a $100 million equity offering projected to take place sometime before March 2006. Should the oversubscription amount be $150 million or more, there would be no rights offering or equity offering.

On the other hand, should the other bondholders fail to tender $150 million principal amount in their portion of the exchange offer, MacAndrews & Forbes said that it would "backstop" that portion of the offering, making up the difference between $150 million and the amount of bonds actually tendered, by subscribing to an additional number of Class A common shares at a price of $2.50 per share, with proceeds going to pay down Revlon Consumer Products debt. In that event, other shareholders of record would be given the opportunity to subscribe to an equivalent amount of Class A common shares at that same price.

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