Revlon products are on sale in a store in New York, June 29, 2022. REUTERS / Andrew Kelly

(Reuters) – Revlon Inc faces a denial of its proposed $1.4 billion bankruptcy loan, with its official creditors’ committee opposing the loan and calling the cosmetics company’s case a “mess” in a court filing on Wednesday.

Bankruptcy financing would give too much power to a coalition of lenders, which owns about half of the company’s $3.5 billion debt, at a time of great uncertainty over the company’s future and who should control it, the creditors’ committee said in a filing in the United States Bankruptcy Court for the Southern District of New York.

“No one today knows what Revlon is worth,” and the financing offered by the coalition of lenders is an effort to “seize the business before its value has been determined,” the committee wrote.

Revlon filed for Chapter 11 in June, saying its high debt load left it too cash-poor to make timely payments to critical suppliers in its cosmetics supply chain. He began his bankruptcy case by borrowing $375 million from the coalition of lenders, and he will seek approval for the rest of the loan at a bankruptcy hearing next week before US Bankruptcy Judge David Jones.

The coalition of lenders known as BrandCo Lenders includes private equity funds and hedge funds such as Ares Management and Oak Hill Advisors.

The creditors’ committee argued in Wednesday’s filing that the same coalition of lenders had already “stunned” other Revlon creditors in a 2020 transaction that allowed Revlon to take on more debt while transferring its brands and its intellectual property assets to another Revlon subsidiary.

There are doubts about whether Revlon’s value exceeds the company’s debt, and a clearer picture will only emerge after the company’s holiday sales in 2022, the committee argued.

But the terms attached to the bankruptcy loan will not give creditors time to assess the value of the business or sort out disputes between creditors, instead forcing the business out of bankruptcy by April 2023 and giving BrandCo’s lenders a veto over any reorganization plan, according to the committee. .

Revlon and Brandco’s lenders could not immediately be reached for comment.

The 2020 transaction was the subject of litigation that took an unexpected turn when Citibank accidentally repaid the entire $894 million loan from 2016. But Citibank is trying to recover the wrong payment, which could revive the 2016 lenders’ battle over intellectual property collateral that transferred in 2020.

The case is In re Revlon Inc, No. 22-10760, in the United States Bankruptcy Court for the Southern District of New York.

For Revlon: Paul Basta, Robert Britton and Alice Eaton of Paul, Weiss, Rifkind, Wharton & Garrison

For the Creditors’ Committee: Robert Stark of Brown Rudnick

For the ad hoc committee of BrandCo Lenders: Eli Vonnegut

by Davis Polk & Wardwell and Danielle Rose by Kobre & Kim

Read more:

Revlon files for bankruptcy and blames supply chain issues

Citigroup urges appeals court to ‘rewind’ after Revlon mistake

Revlon borrows $375 million in bankruptcy to shore up its supply chain

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