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The billionaire financier’s holding company is a shadow of its former self without the cosmetics business he bought in 1985. Picture: BLOOMBERG
The billionaire financier’s holding company is a shadow of its former self without the cosmetics business he bought in 1985. Picture: BLOOMBERG

The rise and fall of Ronald Perelman’s empire has been a staple of New York business and tabloid reporting since the go-go 1980s.

When the pandemic hit in 2020, the billionaire financier’s fire sales of flashy assets became the latest fascination: two paintings by Miro and Matisse worth $37.3m, his Gulfstream 650 and his stake in Humvee-maker AM General, to name a few.

But the bankruptcy of Revlon, filed on Wednesday in New York, is the most significant blow yet to Perelman, who was once touted as America’s richest man. It’s not just the business most closely associated with him and his fortune — it’s the one he worked the hardest to keep.

Without the cosmetics company, run by his daughter Debra since 2018, Perelman’s holding company, MacAndrews & Forbes, is a shadow of its former self. Once boasting a stable of brand names including Marvel, Coleman and New World Entertainment, it’s left with stakes in two little-known biotechnology firms and a marketing company that derives most of its revenue from cheque and mail printing. 

Revlon’s demise is about more than just pride. It threatens to torch not only its suppliers and creditors, but a foundation and banks that have lent money to Perelman in deals backed by the company’s shares.

A spokesperson for Perelman declined to comment.

Revlon has long struggled with a debt load, dating back to when Perelman bought it in 1985, when he was just 42. The contested takeover led him to raise his price several times, eventually paying $2.7bn, including debt, in a deal financed by Michael Milken’s junk bond powerhouse Drexel Burnham Lambert.

While other companies, such as Marvel, went bankrupt under Perelman’s ownership, he remained committed to keeping Revlon solvent, deploying clever and complex strategies to squeeze out cash from other corners of his empire to stage a rescue. 

In 2003 he stepped in with a promise of cash from his holding company to stop Revlon from defaulting as it wobbled under $2bn in debt. Many similar infusions took place, including from Perelman family foundations and his father.

Wall Street began to think Revlon was too big — to Perelman — to fail, as recent court documents detailed.

In a response to a 2020 lawsuit filed by Citigroup seeking to reclaim $900m in Revlon debt repayments it mistakenly wired to creditors, one lender cited Perelman’s frequent bailouts to assert that, to recipients, the early payment wasn’t an obvious blunder.

The belief that Perelman would go above and beyond to save Revlon from failure had come be known in markets as the “Perelman Put”, the fund explained in court documents.

Perelman’s options now appear limited and Revlon’s fate lies with federal courts in New York. The company, which struggled to compete with start-ups backed by social media influencers, listed assets totalling $2.3bn in late April and debts of $3.7bn. 

Even after Revlon’s shares jumped 76% on Friday in response to a report of a potential bid from India’s Reliance Industries, the shares are down about 69% year to date.

MacAndrews & Forbes, meantime, has little left without what’s long been its crown jewel. Excluding Revlon, it has stakes in biotech firms vTv Therapeutics and Siga Technologies, which combined are worth about $300m. It also owns Vericast and received a $2.85bn bid for the company from one of its largest creditors last month that assigned no value to Perelman’s equity stake.

Perelman has been liquidating his personal assets as well, including a 3.6ha Hamptons estate and property on Manhattan’s Upper East Side. He’s put up for sale his $106m superyacht, C2.

He told Bloomberg News in 2020 that the sales were part of a quest to “clean house, simplify”. But there were also signs that he had overleveraged his own finances on top of the companies he ran, including an unusual loan his holding company received from a family foundation. 

MacAndrews & Forbes debts, for instance, had been collateralised with shares of companies he owned, including Revlon. Current creditors include JPMorgan Chase, Deutsche Bank and Royal Bank of Canada, according to filings.   

Revlon shares also collateralised a $125m loan that private foundations administered by Ronald’s father, Raymond, gave to MacAndrews & Forbes in 2016, when Raymond was 98. 

After Raymond’s death, there are signs that loan was transferred with other assets to the Perelman Family Charitable Trust I, a private foundation administered by Ronald and Debra. A loan owned by that foundation had a balance of $132.8m at the end of 2019, the most recent publicly available filings show, making up about a third of the trust’s $407m in assets. 

Such a loan would be atypical. Money in private foundations is supposed to be used for charity and not to benefit a variety of “disqualified” people, including founders, their descendants or any of their organisations. The Perelman foundation says in filings that it engaged in at least one non-permitted credit transaction with a disqualified person.

A lawyer for Perelman said in 2021 that all the trust’s transactions associated with Perelman or his children were vetted and approved by legal and tax counsel. 

In 2021, Princeton University dropped plans to put the Perelman name on a new residential college after saying that the family foundation didn’t make promised payments. Columbia University also dropped plans to name a new building after Perelman.

Bloomberg News. More stories like this are available on bloomberg.com

 

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