Judge Approves $15M Bankruptcy Retention Bonuses for Revlon Employees
By: Hellen Zaboulani
Revlon gained a victory in court, which will help it hang on to its employees amid the chapter 11 bankruptcy proceedings.
As reported by Crain’s NY, on Friday, a federal judge ruled that the ailing beauty care company can spend more than $15 million, awarding cash bonuses to employees in order to keep them from leaving. Judge David S. Jones of US Bankruptcy Court in Manhattan approved the company’s request in a video hearing, and overruled objections from the US Trustee, which had charged that at least six of the employees should not be allowed to earn the retention bonuses because of their positions as company insiders. The judge’s ruling said that those six company executives cannot be called insiders because they don’t hold policy-making roles in the company, which is one of the qualifications.
The company had requested that the court allow it to create a KERP program, which would pay up to $16.4 million to 160 key employees to keep them from bolting. The bonus approved in court, allows for $15.4 million for 150 employees, and is one of the most generous packages ever offered by a company in bankruptcy. The cash bonuses will average $100,000 per recipient, with the condition that the persons will stay on with the company for the duration of the cosmetic giant’s reconstruction. The judge had initially expressed concern that some of the higher-upper executives should not qualify for the bonuses because they were too close to the company’s top echelon and its management decisions.
Revlon filed for Chapter 11 protection on June 16, 2022, due to high debt load, supply chain problems and competition from upstart beauty brands.
MacAndrews & Forbes, led by Ron Perelman, is the holding company which owns roughly 85% of Revlon Inc. The 79-year-old billionaire, whose company acquired Revlon in the 1980s, has a personal net worth of about 2.8 billion as of 2022, down drastically from $19.8 billion in 2018.
In most bankruptcy cases, stockholders with common equity lose everything, but speculators and minority shareholders are hoping that Revlon will follow Hertz in making an exception to that rule. In a rare occurrence, Hertz Global Holding Inc.’s Chapter 11 case ended up leaving shareholders with some recovery. As per Bloomberg, in order for Revlon to repay its creditors in full and offer equity holders any potential recovery, it would need to be bought out of bankruptcy for about $4 billion.
Stocks of Revlon rallied after the bankruptcy, led by retail stock traders. Last month, before the filing, shares were trading at roughly $2.25 per share, the following week, after the bankruptcy, the price per share jumped to a high of $8. The stock was still trading at about $5.45 on Friday afternoon, having almost tripled since the bankruptcy filing. Encouraged by the jump in share price, last week, a small group of minority Revlon shareholders, who together own about 12.8% of Revlon shares not held by Perelman, requested that the court appoint an official committee to represent their interests in the Revlon’s bankruptcy case, in hopes that they too can
