In 2003, he stepped in with a promise of cash from his holding company, MacAndrews & Forbes, to stop Revlon from defaulting as it wobbled under $US2 billion 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 $US900 million 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 the Southern District of New York. The company, which struggled to compete with startups backed by social-media influencers, listed assets totaling $US2.3 billion as of late April, and debts of $US3.7 billion.
Even after Revlon’s shares jumped 76 per cent on Friday in response to a report of a potential bid from India’s Reliance Industries Ltd., shares are down about 69 per cent year to date.
MacAndrews & Forbes, meantime, has little left without what’s long been its crown jewel.
Revlon’s demise is about more than just pride. It threatens to torch not only its suppliers and creditors, but banks and even a foundation that have lent money to Perelman in deals backed by the company’s shares.
Excluding Revlon, it has stakes in biotech firms vTv Therapeutics Inc. and Siga Technologies, which combined are worth about $US300 million. It also owns Vericast and received a $US2.85 billion 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 nine-acre Hamptons estate and property on Manhattan’s Upper East Side. He’s put up for sale his $US106 million 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’d over-leveraged 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 & Co., Deutsche Bank AG and Royal Bank of Canada, according to filings.
Revlon shares also collateralised a $US125 million 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 $US132.8 million at the end of 2019, the most recent publicly available filings show, making up about a third of the trust’s $US407 million 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 last year that all of the trust’s transactions associated with Perelman or his children were vetted and approved by legal and tax counsel.
Last year, Princeton University dropped plans to put the Perelman name on a new residential college after saying that their family foundation didn’t make promised payments. Columbia University also dropped plans to name a new building after Perelman.