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Revlon, the nearly century-old beauty products company, has been pulled back from the brink of bankruptcy.

Ronald Perelman (whose daughter runs the company) and billionaire investor Carl Icahn reached an 11th-hour deal where some bondholders will accept a lower re-payment to keep the company afloat.

In this narrative, "some" is the operative word.

The Story
No amount of concealer could pretty up the backdrop for Revlon. Younger brands have been taking market share for years and people only need so much makeup during a pandemic.

As of Wednesday, Revlon had roughly $343 million of bonds coming due in February 2021. The company's debt agreements required those bonds to be refinanced by November 15th or $1 billion of senior loans would come due immediately.

With not enough liquidity to repay - it was either time to negotiate or break out the bankruptcy papers.

The Move: Revlon made a "tender offer" to repurchase the outstanding bonds at a deep discount. Bondholders would receive either 32.5 cents on the dollar in cash or a mixture of cash and new bonds worth roughly 50 cents on the dollar.

For bondholders, it was a high-stakes case of game theory:

  • On one hand, if too few bondholders accepted the tender offer - Revlon would be forced into bankruptcy and all the bonds would (likely) be worth even less.
  • On the other hand, bondholders could hold out with the hope that enough other bondholders would agree to the deal - allowing the holdouts to be repaid in full.

News: Revlon announced yesterday that 69 percent of the outstanding bonds had been tendered (including a portion or all of Icahn's bonds), allowing Revlon to avoid bankruptcy.

Adding an element of mystery to the high-finance drama, Revlon said it "could not locate" holders of roughly $90 million of untendered bonds, claiming they were owned by "mom-and-pop" retail investors.

According to reports, there is speculation that Perelman himself owned many of the untendered bonds - allowing him to now be repaid in full.

The Takeaway: No blinking. 



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