Moody`s Investors Service has negatively revised its outlook for Revlon`s consumer products after the company announced last month that its board of directors had authorized management to explore alternatives to strengthen its balance sheet and increase its capital. These alternatives could include issuing debt or equity against cash in exchange for Revlon`s debt. The evolution of the outlook is an uncertainty that has arisen as to the date, shape, size, conditions and implementation of a possible restructuring of the capital. The rating also reflects uncertainty about the long-term structure of the company`s capital and the prospects for the recovery of its various debt classes. Revlon has $250 million, bank loans guaranteed by Moody`s at $250 million. The recapitalization transaction saw Revlon “transfer valuable collateral to another company and enter new financing with a subset of lenders structurally at the beginning of the existing loan,” Brigade Capital Management, one of Revlon`s lenders, said in a letter to its investors, seen by LCD. “We do not believe that this transaction is authorized by the credit agreement and we are pursuing all rights and remedies,” the letter states. The sources added that this reasoning could be used to say that Revlon had no right to remove the $65 million revolver, as the company was not authorized to take out additional credit facilities in the event of default, which terminated the entire recap transaction that was concluded in May. Standard and Poor`s raised its rating for the senior credit facility of Spring PCS Alamosa Holdings` subsidiary of CC to CCC. The note was removed from the watch where it was placed in November after entering into a discounted exchange offer from subsidiary Alamosa Delaware at 100%. This offer eliminated approximately $240 million in debt.
Meanwhile, the same group of lenders is also preparing legal action against the company for a recent recapitalization operation, claiming the deal involved manipulation of the creditors` vote and violated the terms of its 2016 credit contract, two of the sources said.