Business Maverick

Business Maverick

Revlon tells bankruptcy judge its shares may be worthless

Revlon tells bankruptcy judge its shares may be worthless
Revlon Ultra HD brand lipcolor is arranged for a photograph in Tiskilwa, Illinois on Wednesday, 28 February 2018. (Photo: Daniel Acker/Bloomberg)

The judge overseeing the cosmetics giant’s bankruptcy has been told that Revlon shareholders don’t need a special, company-funded committee to represent them in the Chapter 11 case because there is no evidence the equity is worth anything.

The company urged US Bankruptcy Court Judge David S Jones in Manhattan to reject the request from minority equity owners in part because low bond prices imply that equity has little hope of recouping anything. The company also argued that the interests of shareholders are already well represented in the case by majority owner MacAndrews & Forbes as well as other groups.

In bankruptcy, official equity committees are rare because all creditors must be paid in full before shareholders are allowed to recover anything from their investment.

The committee representing unsecured creditors also asked Jones to reject a shareholder committee. 

“Revlon stock trading has all the outward appearances of a so-called ‘meme’ stock,” the committee said in its objection, referring to shares that rise in value only because of internet chatter, not economic reason.

Revlon shares tumbled as much as 34% to as low as $5.62 Monday before rebounding to around $8.22, leaving them down some 3% on the day. That price is up from as little as $1.17 in June.

Nearly all official committees are appointed by the Office of the US Trustee, an arm of the US Justice Department that acts as a watchdog in corporate bankruptcies. In the Revlon case, the office appointed the unsecured creditor committee, but last month rebuffed the shareholders. 

The shareholder group, which says it owns 4.7% of Revlon’s common stock not held by insiders, asked Jones on 9 August to order the US Trustee to appoint a panel. On that day, the shares closed at about $8.

Forcing Revlon to fund lawyers and other advisers for a minority group of shareholders would be a waste of money, the company said in court papers. Official committees have the fees of their advisers paid by the bankrupt company.

Shareholders argued that recent prices imply a chance they could get something back

Revlon filed bankruptcy in June as the global supply chain crunch squeezed the debt-laden company while it struggled to tap into a broader cosmetics sales boom driven by social-media influencers.

Investor Ron Perelman’s holding company MacAndrews & Forbes owns about 85% of Revlon. BM


Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted


This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

Become a Maverick Insider

This could have been a paywall

On another site this would have been a paywall. Maverick Insider keeps our content free for all.

Become an Insider
Daily Maverick Elections Toolbox

Download the Daily Maverick Elections Toolbox.

+ Your election day questions answered
+ What's different this election
+ Test yourself! Take the quiz