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After battling the rise of rival beauty firms such as Ulta and Sephora, Avon has now filed for an unexpected Chapter 11 bankruptcy.
According to TheStreet, Avon is no longer seen as essential by the women who formerly shopped there because of the proliferation of affordable beauty goods at stores like CVS, Target, and Kohl’s.
An announcement was made by Avon Products, Inc. (API), a non-operational holding company of the Avon beauty brand based in the US. The company stated that it has voluntarily initiated Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware to handle its debt and legacy talc liabilities.
Keep in mind that the company’s US operations are not addressed in this filing.
Image – Bloomberg
The Avon brand in the US, owned by LG Household & Health Care Ltd., is distinct from all other Avon entities and is not involved in the Chapter 11 proceedings, as stated in the announcement by API.
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Avon Products, Inc. also mentioned that they couldn’t afford to deal with all of the personal injury claims that were pending and that legal fees were adding up.
In response to this litigation, the corporation has already spent $225 million, and it anticipates that this trend will only accelerate.
To alleviate its financial difficulties, API has finalized a selling agreement for its non-U.S. operations with its parent firm, Natura & Co.
The equity rights in these operations will be purchased by Natura for $125 million through an auction that is supervised by the court.
If the court approves Natura’s request for debtor-in-possession financing, which can reach up to $43 million, API will have enough cash on hand to pay its bills while the transaction is underway.
Despite its global struggles, the Avon brand is still a huge deal.
“Our continued emphasis is on implementing our global business strategy, which involves updating our direct selling model and reviving the brand to spur growth,” stated CEO Kristof Neirynck.
“With the help of our esteemed Associates and nearly 2 million Representatives all over the globe, I have been energized by our strengths and opportunities since becoming CEO earlier this year.”
Avon International Operations, the business’s full name, stated assets and debts of $100 million to $1 billion, respectively.
