REVLON, INC. (NYSE:REV) Files An 8-K Entry into a Material Definitive AgreementItem 1.01. Entry Into a Material Definitive Agreement.
Asset-Based Term Loan Credit Agreement
On July 9, 2018 (the “Closing Date”), Revlon Holdings B.V. (the “Dutch Borrower”), a wholly owned indirect foreign subsidiary of Revlon Consumer Products Corporation (“Products Corporation”), the wholly owned operating subsidiary of Revlon, Inc. (“Revlon” and together with Products Corporation and its subsidiaries the “Company”), Revlon Finance LLC, a wholly owned direct subsidiary of the Dutch Borrower (the “U.S. Co-Borrower” and, together with the Dutch Borrower, the “Borrowers”), the other loan parties, the lenders party thereto and Citibank, N.A., acting as administrative agent and collateral agent (the “Agent”), entered into an Asset-Based Term Loan Credit Agreement (the “Asset-Based Term Facility”) and related guarantee and security agreements.
Principal and Maturity
The Asset-Based Term Facility provides for a euro-denominated senior secured asset-based term loan facility in an aggregate principal amount of €77 million, the full amount of which was funded on the Closing Date. The Asset-Based Term Facility has an uncommitted incremental facility to which it may be increased from time to time by up to €43 million, subject to certain conditions and the agreement of the lenders providing such increase. The proceeds of the loans under the Asset-Based Term Facility will be used for working capital and other general corporate purposes. The Asset-Based Term Facility matures on July 9, 2021.
The Asset-Based Term Facility requires the maintenance of a borrowing base supporting the borrowing thereunder, to be evidenced with the delivery of monthly borrowing base certificates customary for facilities of this type, with more frequent reporting required upon the triggering of certain events. The borrowing base calculation under the Asset-Based Term Facility is based on the sum of: (i) 85% of eligible accounts receivable; and (ii) 90% of the net orderly liquidation value of eligible inventory, in each case with respect to certain of Products Corporation’s subsidiaries organized in Australia, Bermuda, Germany, Italy, Spain and Switzerland (the “Borrowing Base Guarantors” and, together with the Borrowers, the “Loan Parties”). The borrowing bases in each jurisdiction will be subject to certain customary availability reserves set by the Agent.
Guarantees and Security
The Asset-Based Term Facility is guaranteed by the Borrowing Base Guarantors, as well as by the direct parent entities of each Borrowing Base Guarantor (not including Revlon or Products Corporation) on a limited recourse basis (the “Parent Guarantors”). The obligations of the Loan Parties and the Parent Guarantors under the Asset-Based Term Facility are secured by first-ranking pledges of the equity of each Loan Party, the inventory and accounts receivable of the Borrowing Base Guarantors, the material bank accounts of each Loan Party, the material intercompany indebtedness owing to any Loan Party (including any intercompany loans made with the proceeds of the Asset-Based Term Facility) and certain other material assets of the Borrowing Base Guarantors. The Asset-Based Term Facility includes a cash dominion feature customary for transactions of this type.
Interest and Fees
Interest is payable on each interest payment date as set forth in the Asset-Based Term Facility, and in any event at least quarterly, and accrues on borrowings under the Asset-Based Term Facility at a rate per annum equal to the EURIBOR rate plus an applicable margin equal to 6.50%. The Borrowers are obligated to pay certain fees and expenses in connection with the Asset-Based Term Facility, including a fee payable to Citibank, N.A. for its services as Agent. Voluntary prepayments and certain mandatory prepayments of the loans under the Asset-Based Term Facility made prior to January 9, 2019 are subject to a 1.0% premium. Loans under the Asset-Based Term Facility may be prepaid without premium or penalty after January 9, 2019.
Affirmative and Negative Covenants
The Asset-Based Term Facility contains certain affirmative and negative covenants that, among other things, limit the Loan Parties’ ability to, subject to various exceptions and qualifications: (i) incur additional debt; (ii) incur liens; (iii) sell, transfer or dispose of assets; (iv) make investments; (v) make dividends and distributions on, or repurchases of, equity; (vi) make prepayments of contractually subordinated or junior lien debt; (vii) enter into certain transactions with their affiliates, including amending certain material intercompany agreements or trade terms; (viii) enter into sale-leaseback transactions; (ix) change their lines of business; (x) restrict dividends from their subsidiaries or restrict liens; (xi) change their fiscal year; and (xii) modify the terms of certain debt. The Parent Guarantors are subject to certain customary holding company covenants. The ability of the Loan Parties to make certain intercompany asset sales, investments, restricted payments and prepayments of intercompany debt is contingent on certain “cash movement conditions” or “payment conditions” being met, which among other things, require a certain level of liquidity for the applicable Loan Party to effect such type of transactions. The Asset-Based Term Facility also contains certain customary representations, warranties and events of default.
The Borrowers must prepay loans under the Asset-Based Term Facility to the extent that outstanding loans exceed the borrowing base. In lieu of a mandatory prepayment, the Loan Parties may deposit cash in an amount not to exceed 10% of the borrowing base into a designated U.S. bank account with the Agent that is subject to a control agreement (such cash, the “Qualified Cash”). If any such over-advance has not been cured within 60 days, the Qualified Cash may be applied, at the Agent’s option, to prepay the loans under the Asset-Based Term Facility. To the extent certain levels of availability are obtained during a certain period of time, the Borrowers can withdraw the Qualified Cash from such bank account. In addition, the Asset-Based Term Facility is subject to mandatory prepayments from the net proceeds from the incurrence by the Loan Parties of debt not permitted thereunder.
Item 2.03. Creation of a Direct Financing Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Please see the discussion set forth under Item 1.01, “Entry into a Material Definitive Agreement,” of this Form 8-K, which discussion is incorporated herein by reference in its entirety.
About REVLON, INC. (NYSE:REV)
Revlon, Inc. manufactures, markets and sells around the world a range of beauty and personal care products, including color cosmetics, hair color, hair care and hair treatments, as well as beauty tools, men’s grooming products, anti-perspirant deodorants, fragrances, skincare and other beauty care products. The Company operates through three segments: Consumer, which includes cosmetics, hair color and hair care, beauty tools, anti-perspirant deodorants, fragrances and skincare products; Professional, which includes a line of products sold to hair and nail salons, and professional salon distributors, including hair color, shampoos, conditioners, styling products, nail polishes and nail enhancements, and Other, which includes the distribution of prestige, designer and celebrity fragrances, cosmetics and skincare products, such as Burberry and Rihanna branded products. The Company also offers Elizabeth Arden portfolio of brands, including its designer, heritage and celebrity fragrances.