Revlon nears creditor support for deal to dodge bankruptcy

Revlon Inc. is close to gaining enough support from bondholders to eliminate a key piece of debt and avoid a bankruptcy filing, according to people with knowledge of the matter.

The stock surged more than 60 per cent.

The cosmetics company said Wednesday that bondholders have now agreed to tender about 69 per cent of a US$343-million bond issue that must be paid down by next week to avoid a cascade of other debt payments. While that's short of Revlon's original goal, the company is expecting additional holders to sign on and is contemplating whether to close the exchange, the people said, asking not to be identified discussing a private matter.

The pending plan is the latest by billionaire Ronald Perelman's cosmetics empire to ease its debt load and buy more time to focus on a business turnaround. The company needs to make a deal by Nov. 16 to avoid triggering the repayment of more than US$1 billion of secured debt.

Talks between the company, its bondholders and advisers are fluid and could change, the people said. Revlon could still decide to file for bankruptcy in the coming days depending on the outcome of discussions.

Representatives for Revlon and Perelman's holding company MacAndrews & Forbes declined to comment.

Revlon shares surged after Bloomberg reported that the exchange could close this week, triggering multiple trading halts. The stock soared as high as US$14.56 a share, a 66 per cent increase, before giving back some gains. Revlon was up US$1.95 to US$10.74 at 2:29 p.m. in New York.

Certain lenders who disagreed with Revlon's earlier transactions have dropped their opposition and will support the company going forward, the people said. The makeup company is likely to have enough support for the deal to avoid triggering the broader repayment, they added.

Revlon has been trying to exchange or otherwise retire roughly US$343 million of unsecured bonds. The company warned that it may need to file for bankruptcy if the swap failed and it lacked the liquidity to otherwise take out the bonds.

As of Tuesday evening, US$236.5 million of the bonds had been turned in, according to the statement.