Revlon Inc. has received approval to borrow $375 million from bankruptcy court on Friday in New York. The cosmetic giant says it would use the funds to shore up supply chain problems that would otherwise imperil its sales during the busy Christmas season.
US bankruptcy judge, David Jones, approved Revlon’s proposed bankruptcy loan on an interim basis after hearing testimony that Revlon was down to US$6 million in cash and struggling to fulfil retail customer orders.
Robert Caruso, Revlon’s Chief Restructuring Office, testified that most of Revlon’s raw material vendors have stopped sending shipments, and many were demanding payment of past debts or deposits on future deliveries.
Without access to raw materials, Revlon cannot meet its sales demands, leaving the company with dwindling cash to solve its supply problem, Caruso said. He added that the company is currently able to fill just 70% of customer orders without backlog or cancellations, compared to an industry standard of 90-95%, Caruso said.
“That will play a big role in how customers think about restocking store shelves for next year,” Caruso said in court. “If we are not able to get the money in and restore our supply chain to meet our customer orders, we will have a lot of harm to the business,” he stressed.
In addition, the company says the worst-case scenario would be that Revlon could also face impacts into 2023, since retailers are going to be making long-term decisions about which products to stock in September.
Revlon has lined up US$575 million in total funding for its bankruptcy case, and it will seek approval at the hearing for the remaining US$200 million.