latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/leveraged-loan-news/revlon-faces-lenders-block-of-note-exchange-potential-lawsuit content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Revlon faces lenders’ block of note exchange, potential lawsuit

Fed rally & default fears bring bifurcation back to leveraged loans

Industry-Specific Losses Stand Out In Leveraged Loan Market As COVID-19, Oil Fears Globalize

Loan Downgrades Are the Biggest Concern for the European CLO Market

Europe’s Leveraged Loan Issuers Draw on Revolving Credits to Preserve Liquidity


Revlon faces lenders’ block of note exchange, potential lawsuit

A group of term lenders to Revlon Cosmetic Products are blocking consent for an ongoing solicitation from the company to exchange its unsecured 5.75% notes due February 2021 for new 5.75% notes due 2024 for 75 cents on the dollar, according to three sources familiar with the matter.

Announced in late July, the planned exchange of Revlon's unsecured notes would not materially impact the term lenders, given the terms of the exchange and lenders' seniority in the capital stack. Rather, the move is part of an ongoing dispute between Revlon and some holders of its term loan, the sources say. Absent an exchange of the notes, a springing maturity on the outstanding term loan will become active in November and could potentially prompt a default, the sources said.

Simultaneously, that same group of lenders is also preparing a lawsuit against the company for a recent recapitalization transaction, alleging that the deal involved creditor vote manipulation and violated the terms of its 2016 credit agreement, two of the sources said.

Sign up for LCD’s newsletter to receive more stories about leveraged finance transactions
Sign up now

As part of the lawsuit, Revlon would face arguments against a $65 million revolving line of credit it took out in late April, the sources said. The term lenders intend to argue that the revolving commitments were placed only to create a simple majority of votes among its 2016 lenders to approve a $1.8 billion recapitalization transaction that closed in May, which involved a carve-out of previously collateralized intellectual property to a select group of lenders that participated, the sources added.

The recapitalization transaction saw Revlon “move valuable collateral to another entity and enter a new financing with a subset of lenders that is structurally senior to the existing loan," said Brigade Capital Management, one of Revlon's lenders, in a July letter to its investors seen by LCD. “We do not believe this transaction is permitted under the credit agreement and are pursuing all rights and remedies," the letter stated.

In April, Revlon launched the recapitalization transaction via lead arranger Jefferies that sought to extend its $1.8 billion term loan placed in 2016 and refinance a $200 million term loan it obtained from Ares Management last year. Originally scheduled to close on April 20, per an initial lender presentation, the deal was delayed as lenders objected to the amendments, due in part to the carve-out of previously pledged intellectual property.

However, Revlon then claims to have autonomously amended its 2016 credit agreement in order to establish the $65 million incremental revolver, which sources say it used to swing the number of votes under the credit agreement to secure consent. Alongside the revolver, Revlon also increased the senior secured term loan facility commitments in the recapitalization transaction and earmarked $65 million post-closing for repayment of the new revolver.

Opposing lenders argue that the $65 million earmark to repay the revolver subsequent to the amendment closing proves that the commitments were designed only to swing votes, not for working capital purposes as disclosed. Second quarter earnings from Revlon reveal that the $65 million revolver was paid in full on May 28, 2020. Press reports have also indicated that Citi resigned as agent on the 2016 term loan facility on May 29, 2020.

Additionally, the lenders opposed to the incremental revolver are alleging a retroactive event of default on a 2019 transaction, according to recent press reports, when Revlon borrowed $200 million from Ares Management last year carving out the intellectual property rights associated with the company's American Crew brand. Paul Weiss served as legal adviser on the transaction.

The sources added that this line of argumentation may be used to say that Revlon had no rights to take out the $65 million revolver, as the company is not allowed to take out additional credit facilities in the event of a default, thus invalidating the entire recap transaction that closed in May.

Revlon did not reply to multiple requests for comment. Ares, Brigade and Citi declined to comment.

Follow LCD on Twitter.

LCD comps is an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

Sign up for LCD’s newsletter to receive more stories about leveraged finance transactions
Subscribe to LCD's monthly newsletter