Revlon Shareholders Can't Form Own Bankruptcy Committee, Judge Rules
Revlon Inc. shareholders don’t need a company-funded special committee to represent them in the cosmetics giant’s bankruptcy.
(Bloomberg) -- Revlon Inc. shareholders don’t need a company-funded special committee to represent them in the cosmetics giant’s bankruptcy, a judge ruled Wednesday.
US Bankruptcy Judge David S. Jones in Manhattan rejected the request from minority equity owners, who claimed a committee is needed to protect the value of the company’s shares, which have traded at unusually high prices since the Chapter 11 case was filed.
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 ruling means any shareholders who want to fight for a recovery must pay their own legal bills.
Shareholders “have not carried their burden of showing a substantial likelihood of a recovery,” Jones said during a court hearing held by video. “A positive stock trading price alone is insufficient.”
Revlon shares fell as much as 19.9% and were halted following the ruling. They were down around 12.9% to $6.7 as of 12:30 p.m. New York.
Revlon filed for 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 around 85% of Revlon. Revlon and its creditors had opposed the request, arguing there is no evidence the company will be worth enough to pay shareholders anything.
Jones found there was a “substantial possibility” that shareholders wouldn’t get anything back in the case. That means any legal and financial advisory fees run up by an equity committee would reduce what unsecured creditors would recover, he said. Such fees often run into the tens of millions of dollars in big, complex bankruptcy cases.
Although the stock had traded up after bankruptcy, debt prices were far below full value.
“The markets don’t know how to interpret anything” about Revlon’s value in bankruptcy, creditor attorney Robert Stark told Jones.
The case is Revlon Inc., 22-10760, U.S. Bankruptcy Court for the Southern District of New York.
(Adds comments from judge and creditors beginning in fourth paragraph. A previous version of the story corrected the bankruptcy code chapter in the second paragraph.)
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