Revlon (REV) Stock: Why It Went Up 89.09%

By Amit Chowdhry ● Aug 2, 2022
  • The stock price of Revlon (REV) surged by 89.09% in the most recent trading session. This is why.

The stock price of Revlon (REV) surged by 89.09% in the most recent trading session. Investors responded positively to a Reuters report that the company received a U.S. bankruptcy judge’s permission to proceed with a $1.4 billion loan over an objection from junior creditors who believed that the terms could block their chance to recover anything from the bankruptcy of the cosmetic company.

U.S. Bankruptcy Judge David Jones in Manhattan had ordered modifications to the loan in response to the junior creditors’ concerns while noting that Revlon must be allowed to borrow the cash it needs to continue its operations in bankruptcy.

Revlon had filed for Chapter 11 in June and said that its $3.5 billion debt load left the company too cash-poor to make timely payments to vendors in its cosmetics supply chain. And Revlon was seeking additional financing from a coalition known as the BrandCo Lenders, which had previously loaned Revlon $1.88 billion over several years before the bankruptcy.

Judge Jones allowed Revlon to borrow $375 million at the beginning of the bankruptcy. The judge’s decision would unlock between $200 million and $1.05 billion in more funds, some of which will be used for paying for Revlon’s existing debts to the BrandCo lenders. Plus the judge’s approval also committed Revlon to non-financial conditions like a schedule for exiting bankruptcy by April 2023 on terms that are favorable to the lenders.

Judge Jones also ordered several changes to the loan agreement, which would give Revlon more time to propose a restructuring plan and give junior creditors more authority to bring lawsuits on Revlon’s behalf.

It is possible that the junior creditors could file a lawsuit against the BrandCo lenders over the new loan. The junior creditors claim that those lenders had previously ripped off Revlon stakeholders in a 2020 debt restructuring that used Revlon’s intellectual property as collateral. That transaction has already been subject to lawsuits from other Revlon lenders. However, the BrandCo lenders noted that the 2020 transaction kept Revlon afloat during the worst of the COVID-19 pandemic and was not fraudulent or aggressive.