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Revlon Refi Stirs Up Investors

Revlon is back in the market with a refinancing, bringing with it the expected dose of grumbling about Ronald Perelman.

Revlon is back in the market with a refinancing, bringing with it the expected dose of grumbling about Ronald Perelman. The billionaire's history with some investors has some potential players steering clear of the $840 million term loan and amendments to the company's existing $160 million revolver. "Perelman...you either love him or hate him," a portfolio manager said of the MacAndrews & Forbes boss. "A lot of people say we're not going anywhere near him." A spokeswoman for MacAndrews & Forbes, which owns Revlon, declined comment.

Citigroup leads the deal with JPMorgan as syndication agent. The new five-year, $840 million term loan will refinance the company's existing $800 million term loan, according to a banker. Pricing on the term loan is LIBOR plus 3 1/2%. The asset-based $160 million revolver received some covenant modifications that were "mostly technical" and a cut in pricing from LIBOR plus 2 1/2% to LIBOR plus 2%, the banker said. Exact changes to the covenants could not be determined, but are expected to give the company more flexibility. The revolver's maturity was also increased by three years to Jan. 15, 2012. A Citi spokesperson did not return a call.

The deal's appearance in the market last week elicited some strong responses. "We never played Revlon before, it has been a perpetual disaster," said an investor not involved in the deal. "It's always been a deal that struggled. It's always had issues and you have the fact that people refuse to do deals that have Ron Perelman's name on it."

But one portfolio manager noted that bank lenders have traditionally done well lending to Perelman's companies. "Banks haven't lost money. You'll keep getting refinanced, but you won't lose money," he said. "But bondholders have gotten completely screwed." He rattled off a few of the firm's invested companies that were doing well, including motion picture camera manufacturer Panavision and bank product and service provider Clarke American. On the other hand, there's Marvel. "We all know what happened there," he said, referring to the 1997 bankruptcy battle between Perelman and a group of bondholders led by Carl Icahn. "Perelman has [hurt] unsecureds in the past," said another investor, but commented that secured deals were probably a much safer bet.

One investor said struggles with new product launches have hurt Revlon's numbers. But another buysider said enough people are comfortable with the name and hedge funds are eager enough to lend to get the deal done. "Revlon will get done," he continued. "The question is, at what level?"

The company's existing "B" loan was trading at 101.5-102.5 Friday morning. "But at LIBOR plus 6% it should be trading higher than that," an investor said. Calls to Alan Ennis, cfo of Revlon, were referred to a spokeswoman who referred questions to a press release.

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