Melissa Juried Kriebel
- Revlon stock surged 121% on Monday after a judge approved a bankruptcy loan for up to $1.4 billion.
- Revlon filed for Chapter 11 bankruptcy protection in June after suffering a COVID-19 induced slowdown to its business.
- Since filing for bankruptcy, shares of Revlon surged more than 670% as investors bet there may be a deal that includes shareholders.
Revlon continued its post-bankruptcy-filing stock surge on Monday, jumping 121% after a judge gave permission for the company to move ahead with a loan for up to $1.4 billion.
The approval from the judge came at the objection of some creditors, as the court ruled that Revlon must be allowed to continue its business operations during the bankruptcy proceedings.
Revlon filed for bankruptcy in June after a COVID-19 induced slowdown to its business put the company on edge of defaulting with its creditors. The cosmetics company has also seen a deterioration to its business as makeup companies started by the Kardashian sisters have taken a bite out of their earnings power in recent years.
Since filing for bankruptcy in June, Revlon’s stock has surged more than 670% from its low of $1.25 per share, to a high of $9.90 per share on Monday. The surge higher continues a trend of retail investors betting big on companies that file for bankruptcy, similar to Hertz in 2020, in the hopes that a deal may be reached that doesn’t wipeout all of the equity value.
Under today’s deal, Revlon will immediately be able to draw up to $200 million of debtor-in-possession financing, and US bankruptcy judge David Jones said Revlon will have to boost its budget for low ranking creditors, and that it has to exit bankruptcy proceedings by April 2023, according to Reuters.
Jones had already given Revlon permission to draw $375 million from the loan at the start of the bankruptcy proceedings in June, and today’s deal gives Revlon the ability to borrow between $200 million and $1.05 billion.
Still, despite today’s deal, the question remains if Revlon’s equity holders will be left with anything after the bankruptcy proceedings, or if they’ll be completely wiped out as the company prioritizes paying back debt holders, as usually happens in bankruptcy.
For now, retail investors are betting their might just be some equity value remaining in the company. But with more than $3.5 billion in outstanding debt, it’s hard to see that happening.