Revlon completes offer to exchange preferreds for class A stock

By Angela McDaniels

Tacoma, Wash., Oct. 8 - Revlon Inc. said it issued 9,336,905 shares of 12¾% series A preferred stock in exchange for an equal number of shares of class A common stock in an exchange offer that expired at 11:59 p.m. ET on Oct. 7.

The shares tendered represent 46% of the class A common stock not beneficially owned by MacAndrews & Forbes Holdings Inc. and its affiliates, according to a company news release.

In connection with the completion of the exchange offer, MacAndrews & Forbes contributed to Revlon $48,645,275 principal amount of the senior subordinated term loan between MacAndrews & Forbes and Revlon Consumer Products Corp., Revlon's wholly owned operating subsidiary.

The amount represents $5.21 of principal amount of the loan for each class A share exchanged in the offer.

For each class A share exchanged in the offer, Revlon issued to MacAndrews & Forbes one share of class A common stock, or 9,336,905 shares in total.

As a result of these transactions, MacAndrews & Forbes and its affiliates beneficially own 37,544,640 shares, or 77.5%, of Revlon's class A common stock, all 3.125 million shares of its class B common stock and 78.9% of the combined class A and class B common stock, representing 77.3% of the combined voting power of both classes of common stock and the preferreds.

Revlon's stockholders other than MacAndrews & Forbes and its affiliates beneficially own 10,898,432 shares, or 22.5%, of Revlon's class A common stock and all 9,336,905 of the preferreds, representing 22.7% of the combined voting power of Revlon.

The company noted that each share amount, share percentage and dollar amount is approximate.

Prior to the exchange offer, MacAndrews & Forbes beneficially owned about 58% of Revlon's class A common stock, all of its class B common stock and approximately 61% of its combined outstanding shares of class A and class B common stock, which together represented about 75% of the combined voting power of such shares.

As previously reported, Revlon amended the offer on Sept. 24 and extended the expiration to Oct. 7 from Sept. 24.

Under the revised terms:

• Each preferred issued in the offer has a liquidation preference of $5.21, rather than $3.71 as previously proposed;

• Because the liquidation preference was increased by $1.50, holders of the preferreds no longer have the right to receive a special dividend of $1.50 if Revlon does not engage in a change-of-control transaction within two years of consummation of the exchange offer;

• Holders of preferreds will receive cash payments of $7.87 per share (instead of $7.10 per share, as previously proposed) over the four-year term of the preferred stock through the payment of the $5.21-per-share liquidation preference at maturity (instead of $3.71 per share, as previously proposed) and 12¾% annual dividends payable quarterly in cash, equal to approximately $0.17 per share quarterly (instead of dividends of approximately $0.12 per share quarterly and a $1.50 per share special dividend at the end of two years, as previously proposed).

These per-share calculations assume that Revlon does not engage in any one of several specified change-of-control transactions, which may lead to a higher payment;

• If Revlon engages in one of the specified change-of-control transactions within three years of consummation of the exchange, holders of the preferreds will have the right to receive a special dividend, capped at an amount that would provide total cash payments of up to $12.00 per share, including the liquidation preference and any dividends.

As previously proposed, holders were only entitled to such payment if Revlon engaged in one of certain specified change-of-control transactions within two years of consummation of the exchange, although holders of the preferreds could have effectively extended this right for one year (and during such third year their right to receive such special dividend would have been capped at $12.50 per share) by converting their series A preferreds into series B preferred stock and giving up the $1.50 special dividend to which they would have been entitled after two years;

• Series A preferred stock will no longer be convertible into series B preferred stock because holders of series A preferred stock will now have the opportunity to receive a special dividend if Revlon engages in one of certain specified change-of-control transactions within three years of consummation of the exchange offer;

• As previously proposed, MacAndrews & Forbes would have contributed $3.71 of the term loan between MacAndrews & Forbes and Revlon Consumer Products for each share tendered - instead of $5.21 - up to a maximum contribution of $75 million.;

• The maturity date of the portion of the term loan contributed to Revlon has been extended from Aug. 1, 2010 to the fourth anniversary of the consummation of the exchange, and the interest rate was changed to 12.75% from 11%, while the maturity date of the portion of the term loan that will remain owed to MacAndrews & Forbes was extended from Aug. 1, 2010 to the fifth anniversary of consummation and the interest rate has been changed to 12% from 11%.

As previously proposed, the maturity date of the entire term loan would have been extended to the fourth anniversary of consummation of the exchange and the interest rate would have been changed to 12.75%;

• The minimum condition was amended to at least 7.5 million shares of class A common stock not beneficially owned by MacAndrews & Forbes and its affiliates, or 37% of the class A stock not beneficially owned by MacAndrews & Forbes and its affiliates. The minimum condition originally provided that at least 10,117,669 shares be tendered.

Revlon makes cosmetics and other personal care products and is based in New York.

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