Revlon Gets a Debt Makeover as Bills Come Before Beauty

Revlon MakeupRevlon's (REV) stock has been choppy lately, swinging 10% to 20% in either direction on small news items. Recently, a fire at its plant in Venezuela led to a near 10% dip, even though that market makes up only 3% of its sales. Investors' concerns regarding Revlon's debt levels underlie this volatility, though its recent efforts to refinance some existing debt have helped to alleviate those worries. Revlon is one of the leading makers of cosmetics and beauty care products and competes with personal care companies like L'Oreal (LRLCY), Estee Lauder (EL) and Avon Products (AVP).

We value Revlon with a $17.66 Trefis price estimate of its stock, which is roughly 10% ahead of its current market price.

Here we take a closer look at some of the recent events that have contributed to Revlon's swings in the past month.


Refinancing of Revlon's existing term loan facility


In mid-May, Revlon announced a new term loan facility refinanced an outstanding $792 million loan with an $800 million loan while reducing Revlon's effective interest rate on the debt and extending its maturity for this debt from March 2015 to November 2017. This move took advantage of the favorable fundraising environment and gave the company some more flexibility with its debt obligations.

We wrote recently how earnings have held up for the company and that debt was on of the biggest outstanding factors. (See Revlon Earnings Show Recovery Underway, Debt Levels Should be Next Focus)

Source: Google Finance

Fire in Revlon's Venezuelan Manufacturing Facility

A fire damaged Revlon's facility in Venezuela on June 5, 2011. The company has yet to release the extent of the damage to its business but given that Venezuela makes up for only 3% of Revlon's sales total asset base, the subsequent 9% drop (from $16.50) in Revlon's stock was exaggerated in our view.

Refinancing of Revlon's Revolving Credit

Earlier this week, Revlon announced that it refinanced its existing revolving credit facility that was set to expire in March 2014, pushing its new $140 million revolving credit facility to June 2016 while securing better financing terms from the banks underwriting these loans.

Again, the reduced interest expense was met with a favorable response as Revlon's stock climbed up to current levels of around $16, with a further recovery expected in the near future.

View our detailed analysis for Revlon

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19 Comments

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angelsun1983

I love Revlon products!!!!!! I used to sell Ultima 2 products at JCPenney. Great Make up.....I hope they do not ever discontinue!!!!!!!!!!!

June 27 2011 at 8:52 AM Report abuse rate up rate down Reply
PsychedelicSpell

So lipstick made of dyes and a fat base that can be plant, beeswax, lanolin, paraffin, silicone waxes. Or Mascara that contains varying pigments and oils waxes. Liquid foundation which is mostly made of water glycerin's forms of glycols waxes. Has everyone in a tizzy. How is this that makeup is outdated. All the debt makeovers will not help the bottom line if they cannot keep up with the times.

June 27 2011 at 1:00 AM Report abuse rate up rate down Reply
dannyh94102

Venezuelan Plant??? Let Venezuela buy their 3rd world products. I certainly won't.

June 26 2011 at 11:32 PM Report abuse rate up rate down Reply
ftep

Revlon was a winner before Perlman. Innovation, glamour, manufacturing prowess, financial muscle. Perlman stripped it of it's financial muscle and everything collapsed with it. Perlman just got personally fat. Can it ever come back? Not with Perlman and boys.....

June 26 2011 at 6:42 PM Report abuse rate up rate down Reply
savemycountry911

Trickle down economics is the opposite of Obama's trickle up poverty.

June 26 2011 at 5:16 PM Report abuse -1 rate up rate down Reply
x

Thank Ron Perlman and the other "junk bond" guys that drained this company DRY and increased debt!
Read about the bankrupt Pantry Pride supermarkets pension fund raid scam Ron and the boys pulled off
in the 80s to BUY The then profitable Revlon corp. and take it private THEN sell stock to screw investors
for a SECOND TIME!!!!!!!!!!!!!!!!!!!!!!

June 26 2011 at 1:47 PM Report abuse +1 rate up rate down Reply
madddddddddddddd

this says nothing...............a waste of time...................

June 26 2011 at 1:36 PM Report abuse rate up rate down Reply
ThinkUp70

It's just another example of an American company that manufactures it's goods overseas, but expects Americans to be loyal buyers of their foreign made products.

June 26 2011 at 10:32 AM Report abuse +5 rate up rate down Reply
lonagibson123

We did just that - cashed out the 529's. Refied to a lower, fixed rate to get out of an ARM check out "123 Refinance" to find lower rates with out entering your SSN!

June 26 2011 at 2:30 AM Report abuse -1 rate up rate down Reply
miriametienne

I felt sad because as a child my grandmothers and also my mom used to buy REVLON COSMETICS back then they were the best but as of lately nobody buys their products anymore

June 26 2011 at 2:15 AM Report abuse +1 rate up rate down Reply