Revlon pushes back against shareholder demand for equity committee

Revlon Inc has pushed back against a shareholder demand for greater representation in the cosmetics giant's bankruptcy case, saying that an official equity committee would not increase shareholders' ultimate recovery.

Revlon filed a brief in Manhattan federal court on Sunday arguing that the company's $3.5 billion debt load meant that shareholders would likely receive nothing from the company's bankruptcy, so a committee's "significant" costs would "greatly outweigh any speculative benefit."
A group of shareholders on Aug. 9 had asked U.S. Bankruptcy Judge David Jones to appoint an official equity committee in Revlon's bankruptcy, saying that no one else could be trusted to speak up for minority equity owners.

The shareholders pointed to increases in Revlon share prices after it filed for Chapter 11, saying that the company's equity had long-term term value and was more than a "meme stock" fueled by irrational retail investors and social media buzz.

Official equity committees are rarely approved in bankruptcy. Revlon pointed out that no equity committee was appointed in the Hertz Inc bankruptcy, which ended in a rare win for shareholders in 2021 and was cited as a comparable case by the Revlon minority shareholders.

Revlon argued that since shareholders cannot be paid until all other debts are satisfied, stock price alone is a poor indication of the company's value. Debt markets show a gloomier outlook of the company's future value, with the company's unsecured bonds trading as low as 10 cents on the dollar despite apparent demand for Revlon's stock, according to Revlon's Sunday court filing.

Revlon's junior creditors and senior lenders also objected. The senior lenders said the stock price fluctuations were "untethered from market realities."

The minority shareholders did not immediately respond to a request for comment.

The New York Stock Exchange briefly halted trading in Revlon shares on Monday amid price fluctuation. The company's shares closed at $8.22 on Monday.

Revlon filed for Chapter 11 in June, saying its $3.5 billion debt load left it too cash-poor to make timely payments to critical vendors in its cosmetics supply chain.

The shareholders asked Jones to rule on their request at an Aug. 24 court hearing.

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