Avon Products, Inc. files for Chapter 11 bankruptcy

14-Aug-2024 - Last updated on 14-Aug-2024 at 12:53 GMT

"Today's action and the proposed sale of Avon's non-US operations will maximize the value of our assets and enable us to address our obligations in an orderly manner," said API chairperson John Dubel. © pawel.gaul Getty Images

The filing is intended to address Avon Products, Inc.'s debt and legacy talc liabilities, while ensuring that its international operations, under the ownership of Natura &Co, continue unaffected.

Avon Products, Inc. (API), a US-based holding company of the Avon beauty brand, has taken significant steps to address its financial challenges by filing for voluntary Chapter 11 bankruptcy in the US Bankruptcy Court for the District of Delaware. This filing is a strategic move to resolve API's debt and legacy talc liabilities.

API, which has not sold products in the US since divesting its North American business in 2016, remains the holding company for Avon's non-US operating entities. The case, including API and certain US subsidiaries like AIO US, Inc., is now under joint administration (Case No. 24-11836).

International operations unaffected

One of the key points highlighted in the proceedings is that Avon's international operations are not part of the Chapter 11 filings, ensuring that the business will continue as usual in its markets outside of the US, where it has been advancing strategic initiatives under the ownership of Brazil-based Natura &Co. Natura &Co, which acquired Avon in 2020, remains committed to the brand and has agreed to purchase Avon's non-US operations for $125 million, subject to a court-supervised auction process.

In a separate press release, Natura &Co recently reported improved revenue trends for the second quarter of 2024, with strong performance by Natura in Brazil and signs of stability at Avon in the country. The company also highlighted that Hispanic countries implementing the second wave of the Natura and Avon integration continue to boost profitability in Latin America. Despite ongoing challenges, particularly at Avon International, Natura &Co's consolidated net revenue reached BRL 7.4 billion, up 5.7% year-over-year in constant currency.

John Dubel, Chairperson of API, emphasized the strategic nature of this move, and shared in a press statement that "today's action and the proposed sale of Avon's non-US operations will maximize the value of our assets and enable us to address our obligations in an orderly manner."

Financing secured to support operations

To ensure that API can meet its obligations during the sale process, Natura &Co has committed up to $43 million in debtor-in-possession (DIP) financing. A media statement confirmed that, pending court approval, this financing will provide API with the necessary liquidity to continue operations throughout the bankruptcy proceedings.

Avon CEO Kristof Neirynck, who took on the role earlier this year, expressed confidence in the company's future. In a press release regarding the filing, she shared that "we remain focused on advancing our business strategy internationally, including modernizing our direct selling model and reigniting the brand to accelerate growth."

Neirynck added, "Since becoming CEO earlier this year, I am increasingly energized by our strengths and opportunities, supported by our valued Associates and nearly two million Representatives around the world."

Legal & financial advisors involved

As reported by the press release, API has retained Weil, Gotshal & Manges LLP as legal counsel, Ankura Consulting Group, LLC as financial advisor, and Rothschild & Co as investment banker to manage the bankruptcy process. These firms are tasked with guiding API through the complexities of the Chapter 11 process, ensuring that the company's assets are preserved and that it can continue to operate effectively during the proceedings.

The future of Avon's US operations

It is crucial to note that The Avon Company, which currently operates the Avon brand in the US and is owned by LG Household & Health Care Ltd., is not involved in these Chapter 11 proceedings. This separation underscores that the current bankruptcy filing pertains exclusively to API and its US subsidiaries, not the broader Avon brand that continues to function independently in the US market.

As confirmed in the additional press release, Natura &Co also completed another issuance of debentures linked to sustainability goals during the quarter, the first Brazilian bond linked to bioactives from the Amazon. By issuing the BRL 1.3 billion green bonds, the company committed to achieving the target of incorporating 49 Amazon bioactives in its catalog by 2027—it currently has 44 ingredients.

The Chapter 11 filings, including court documents and further updates on the case, are accessible through the US Bankruptcy Court for the District of Delaware. As the process unfolds, stakeholders will be closely monitoring the developments, particularly the outcome of the court-supervised auction process and how it will impact Avon’s global operations.

This strategic move by API represents a crucial step in addressing longstanding financial obligations while allowing Avon's international operations to continue driving growth and innovation in the beauty industry. As the case progresses, the focus will remain on how the restructuring efforts will shape the future of one of the iconic beauty brands.