Revlon lenders sue for theft of $ 1.8 billion secured loan
A group of investors accused Revlon Inc. of stripping its collateral as part of a “brazen” scheme to raise new capital. The lawsuit, filed Wednesday by UMB Bank, a subsidiary of Kansas City, Missouri-based UMB Financial Corp., claims Revlon wrongly moved the American crew, Elisabeth arden, Almay and other brands out of the hands of investors who loaned the company $ 1.8 billion in 2016.
The struggling cosmetics firm falsely transferred the intellectual property rights used as collateral for the 2016 loan in a series of other transactions from 2019 as it lost market share and the pandemic hurt sales. UMB Bank seeks a court order forcing the return of the warranty, which includes the trademarks.
Accused of rigging the vote of the lenders
“This case is a vivid example of a borrower who repeatedly ignored his legal obligations to his lenders,” UMB said in the lawsuit filed Wednesday in federal court in Manhattan. “COVID-19 is not a license to violate contractual commitments to lenders, to engage in transparent vote rigging, and to steal and reuse collateral for other purposes. “
UMB represents lenders, including Brigade Capital Management, Symphony Asset Management, and HPS investment partners who have months of resistance Revlonrestructuring tactics.
According to the lawsuit, Revlon was able to borrow rescue funding by removing some of the Mark assets securing the 2016 loan and pledging them as collateral to other lenders, including Arès management.
In a report, Revlon said the group had repeatedly resorted to “baseless accusations in an attempt to enrich themselves and harm the business by blocking Revlon to exercise its contractual rights to obtain the necessary financing to execute our recovery strategy and get through the Covid-19 crisis. “
Revlon said he would fight UMBthe “baseless” trial of.
Revlon, which is supported by Ron Perelman MacAndrews & Forbes, struggled to make sales in a context of fierce competition from Estee Lauder Businesses and many small businesses use social media to attract customers. To make matters worse, the beauty company is burdened with nearly $ 3 billion in debt as it battles the coronavirus outbreak.
According to the lawsuit, Revlon was only able to borrow funding by taking some of the brand’s assets backing the 2016 loan and pledging them as collateral to other lenders, including Area Management. Furthermore, Revlon issued $ 65 million in revolving loans to rig a lender vote in favor of one of the restructuring efforts.
According to the lawsuit, Revlon siphoned off part of the 2016 loan collateral to secure a 2019 $ 200 million loan from Ares Management, giving the new lender “its own exclusive security interest in the same property.” The beauty company also brokered a bigger and bolder deal in May 2020 that raised an additional $ 870 million and was devastating for lenders in 2016.
Besides, Revlon designed an end of the race around the consent threshold by organizing a “sham” revolver loan with friendly investors who provided the majority needed to improve the new financing.
“Fictitious” revolving loans are not uncommon
In recent years, several companies have misappropriated collateral assets from lenders, taking advantage of flexible debt arrangements to release collateral and increase financial flexibility.
Earlier this year, the booking platform Travelport around the world used assets pledged as collateral to secure a $ 1 billion loan. He had legal issues with some of the Wall Streetthe biggest debt buyers.