PERELMAN TAKES REVLON POWDER
Billionaire financier Ron Perelman is once again trying to put lipstick on his struggling cosmetics giant Revlon.
The company announced yesterday that it will use proceeds from the recent sale of its Brazilian cosmetics division and an upcoming stock offering to pay off a $170 million high-interest loan from Perelman’s holding company, McAndrews & Forbes.
Perelman said he plans to buy 61 percent of the shares in the new stock offering, which aims to raise about $107 million. It is the third rights offering the company has done this year as it tries to raise capital and retire debt.
“We will eliminate our highest-cost, nearest-maturity debt,” Revlon boss David Kennedy said in a statement. He noted that paying off the loan will save nearly $19 million in annual debt expenses.
Revlon’s stock fell 15 percent yesterday in NYSE trading to close at $1.23 on the news.
The company will use a part of the net proceeds from its July 2008 sale of its Bozzano business to repay $63 million of the term loan. The maker of blushes and nail polish will still have about $1.2 billion of debt on its books after paying off the loan.
Revlon has sustained nearly 10 years of losses as larger competitors like Proctor & Gamble and L’Oreal have pushed the company’s products off store shelves.
Perelman, still the company’s largest shareholder, took control of Revlon in a 1985 leveraged buyout and then floated it on the public market 11 years later.
Since then, the financier has been trying to rejuvenate the struggling company, whose stock once traded as high as $50 a share.
Revlon has gone through several management teams over the last decade but the current one seems to have had some success cutting costs and introduced new lines of cosmetics.
In July, Revlon posted better-than-expected profits for the second quarter as new cosmetic products, including ones advertised by actresses Jennifer Connelly and Halle Berry boosted international sales, and expenses continued to fall.
“Operationally, they seem to be getting on much steadier footing and are going to be cash-flow positive and actually profitable for a full-year basis,” said SunTrust Robinson Humphrey analyst Bill Chappell.