Revlon Replaces Citi on Revolver Loan With Apollo’s MidCap
(Bloomberg) -- Revlon Inc., the makeup giant that’s reworking its business and its borrowings, replaced Citigroup Inc. as agent on part of its finances with an affiliate of Apollo Global Management Inc. in the wake of the bank’s $900 million error on a separate loan.
The company tapped MidCap Financial as its collateral and administrative agent to work out a one-year extension into 2024 for its revolver, Revlon said Monday in its first-quarter results. The report included a narrower loss and showed improvement in sales trends coming out of the pandemic, but still missed some estimates, and the shares dropped as much as 10%.
The change doesn’t sever ties with Citi, which “remains an important partner for Revlon,” a representative for Revlon said in a statement to Bloomberg, adding the company looks “forward to continuing to work with them in a number of capacities.”
MidCap, the new agent, is a specialty finance firm focused on middle-market companies with more than $27.8 billion of commitments that’s backed by Apollo Capital Management, according to its website.
Citi still assisted on the recent amendment to Revlon’s revolver and earned a fee for its work, and it’s still working on the ill-fated 2016 term loan that’s tied up in ongoing litigation, according to people familiar with the matter. They asked not to be identified because the matter is private.
The job of an agent involves collecting and distributing interest payments and providing other housekeeping services, which Citigroup handled as recently as last quarter on the revolver. The transaction “will enhance” Revlon’s liquidity and operations, Chief Financial Officer Victoria Dolan said on a call to discuss the results. A Citigroup representative declined to comment; Apollo and MidCap didn’t immediately respond to messages.
Citigroup accidentally wired more than $900 million to asset managers for Revlon’s lenders last year even though it wasn’t due, and then asked them to give the money back. The bank was able to recover part of the sum and lost a court fight with creditors over the remaining $500 million, leaving Citigroup to assume the role of a Revlon creditor.
The money came from Citi’s accounts, and didn’t affect Revlon’s existing loans, but the blunder forced Citigroup to answer to regulators and tighten its internal controls.
News of the switch in agents came as Revlon reported a narrower loss for the first three months of this year and some sequential improvements. But sales continued to fall 1.8% from a year earlier due to changing consumer habits, rising competition from startups with strong social media presence and the Covid-19 pandemic.
Excluding $44 million of estimated impact from Covid-19, the company said net sales would have been positive. Results were helped by e-commerce and the Elizabeth Arden brand, representing a bigger chunk of sales.
Total liquidity fell to $129.6 million at the end of the quarter from $249.9 million on Dec. 31. Cash and equivalents dropped to $85.6 million from $97.1 million at year-end.
Backed by billionaire Ronald Perelman, Revlon has shuffled its finances to ease its debt burden and buy more time to focus on a business turnaround. It completed a debt exchange in November that eliminated the potential for a bankruptcy filing in the near future.
On Monday, the cosmetics company said it’s expanding on a previously announced restructuring of operations that would boost organic sales growth and provide $75 million to $95 million of annualized savings by the end of 2023.
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