Revlon, the beauty and cosmetics company first founded in 1932, has filed for bankruptcy.
Ugly financials
For years Revlon, which owns Elizabeth Arden and a number of fragrance lines (including Britney Spears and Christina Aguilera's brands), has struggled with a growing debt pile. From 2009-2015, Revlon mostly had that debt under control, ekeing out enough of a margin to cover the annual interest expense every year.
But then Revlon acquired Elizabeth Arden in a bid to buy its way to growth. That meant taking on more debt, at a time when competition in the beauty space was intensifying. Revlon started to struggle. Having been reliant on physical distribution in malls and shops for years, Revlon suddenly had to compete with upstart brands such as Fenty Beauty (by Rihanna) or Kylie Cosmetics (by Kylie Jenner).
These were digitally-native brands with huge followings that shipped straight to consumers, meaning cheaper marketing and distribution. Fenty Beauty has 12.9m followers across social media platforms Instagram and TikTok, Kylie Cosmetics has 28.9m. Revlon has 3m.
Beauty is in the eye of the debtholder
As debt piled up Revlon shifted some assets into a new holding company, in an attempt to attract new lenders. That was fine except it wasn't — Revlon's long-time lenders sued, alleging that the company had breached their loan agreements. That's complicated enough but it became comically complicated when Citibank — which was acting as a loan agent — accidentally paid off $900m of Revlon loans with its own money. Citi said "woops sorry can we have that back". Some of the counterparties said yes, but others weren't so keen to forgive and forget, leaving Citi out of pocket for Revlon's loans... and now Revlon is going bankrupt. Lawyers, sharpen your pencils.
