This audio is auto-generated. Please let us know if you have feedback.
Citing rising competition in the beauty industry, the COVID-19 pandemic, Russia’s war on Ukraine and lawsuits related to talc ingredients, Avon Products Inc. and affiliated entities on Tuesday filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, according to a company press release and court documents.
The debtors are all wholly owned subsidiaries of Brazilian beauty conglomerate Natura & Co., which acquired them in 2020, and is now the holding company of Avon’s non-U.S. operating entities.
Natura & Co. cited Avon’s struggles in its most recent financial filing, and its talc-related liabilities have emerged as a financial burden. Last month, a jury in Chicago sided with a plaintiff who had sued Avon for health issues related to talc exposure, awarding him $24.4 million. In court filings, Avon said it still faces another 380-plus talc-related cases. Despite resolving many such claims, which Avon told the court it views “as without merit,” this litigation has been a source of strain because it has limited insurance coverage related to “legacy talc liabilities.”
Natura & Co. is both the largest creditor of the entities involved in the bankruptcy and has agreed to be a stalking horse bidder, with an agreement to purchase the equity interests in Avon's non-U.S. operations for $125 million in the form of a credit bid. Natura & Co. has also committed up to $43 million in debtor-in-possession financing to fund Avon Products’ obligations during a court-approved sale process.
Just ahead of the filing, Avon’s outstanding funded debt, including guaranties of their subsidiaries’ funded debt, amounted to about $1.3 billion, per court documents.
While this week’s bankruptcy filing involves various entities sporting the Avon name, it does not include the Avon Company — the Avon brand in the U.S. — which is owned by LG Household & Health Care but not affiliated with the other Avon entities. LG H&H, a K-beauty specialist based in Korea, has operated Avon's North America business since acquiring it in 2019.
Natura & Co.’s plan to split off its Avon holdings into a separate business is now on hold.
via https://www.aiupnow.com
Daphne Howland, Khareem Sudlow
