How will Revlon meet Christmas sales demands with low cash?

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Revlon Secures Bankruptcy Loan to Address Supply Chain Issues Ahead of Christmas Sales

Revlon Inc. has received bankruptcy court approval to borrow US$375 million, primarily to address significant supply chain problems that are impeding its ability to fulfill customer orders. The company's cash reserves have dwindled to US$6 million, forcing most raw material vendors to halt shipments and demand payment for outstanding debts or deposits on future deliveries. This financial strain has reduced Revlon's order fulfillment rate to 70 per cent, falling short of the industry standard of 90-95 per cent, thereby jeopardising its capacity to meet anticipated demand during the crucial Christmas sales period.
Funding Allocation for Operational Stability

The approved bankruptcy loan includes approximately US$300 million designated for Revlon's day-to-day business operations. An additional US$75 million will be allocated to reduce debts owed by the company's foreign subsidiaries, which are not included in the current US bankruptcy proceedings. This funding is intended to provide the necessary liquidity to resume operations and begin rebuilding its supply chain infrastructure.
Addressing Vendor Demands and Restoring Supply

A critical aspect of Revlon's strategy involves addressing the demands of its raw material vendors. Most vendors have ceased shipments due to unpaid debts or the requirement for upfront payments on new orders. The borrowed funds are expected to enable Revlon to settle past due amounts and potentially provide deposits for future raw material procurement, thereby restoring the flow of necessary components for manufacturing.
Impact on Christmas Sales and Future Planning

The inability to secure raw materials and fulfil orders poses a significant risk to Revlon's sales performance during the upcoming Christmas season. Furthermore, this situation could have repercussions extending into 2023, as retailers make stocking decisions in September. Revlon's chief restructuring officer, Robert Caruso, highlighted in court that failure to secure funding and restore the supply chain will result in substantial harm to the business, potentially impacting long-term retailer relationships and product placement on store shelves.
Total Funding and Loan Approval Process

Revlon has secured commitments for a total of US$575 million in funding for its bankruptcy case. The company plans to seek approval for the remaining US$200 million in the following month. While some junior creditors and the US Department of Justice's bankruptcy watchdog raised concerns regarding loan terms and lender fees, the bankruptcy judge granted interim approval, acknowledging it as the best available option to support Revlon's restructuring efforts.

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How will Revlon meet Christmas sales demands with low cash?

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