UMB Bank hits Revlon with lawsuit for IP theft
UMB Bank has filed a lawsuit against cosmetics company Revlon, claiming that it illegally shifted its collateral trademarks away from creditors who provided it with nearly $1.8 billion four years ago. The suit filed at the US District Court for the Southern District of New York yesterday, August 12, also names Citibank, Jefferies Finance, along with other subsidiaries and companies associated with Revlon as defendants.
In 2016, Revlon entered into a credit agreement with UMB to acquire beauty brand Elizabeth Arden, which included a $1.8 billion term loan facility secured against the company’s valuable trademarks. UMB Bank claims that following the loan, Revlon struggled financially as it lost market share to e-commerce sellers and specialty beauty shops, while its traditional reliance on fashion icons as brand ambassadors “failed to generate the same buzz as fashion upstarts and self-made experts who were savvy with social media platforms”.
The bank claimed that in response to these difficulties, the cosmetics company breached the agreement and made a series of deals and fraudulent moves with other lenders using the same collateral. It said that in August 2019, Revlon took its first known step in “stealing away” the collateral, by borrowing $200 million from Ares Corporate Opportunities under a new credit agreement.
According to UMB, Revlon achieved this by transferring IP associated with its American Crew brand, the leading US men’s grooming brand to a new subsidiary, “American IP” which meant that IP was no longer collateral for the 2016 credit agreement.
UMB Bank claims that the “theft” of the American Crew IP in connection with the 2019 credit agreement was “an event of default under the 2016 credit agreement”.
‘Just getting started’
It accused Revlon of “just getting started” and accused it of unveiling “a much bigger, bolder transaction” in spring 2020, when it allegedly tried to siphon off nearly all of the remaining collateral IP, including the Elizabeth Arden brand. UMB Bank claims that Revlon was assisted in this audacious move by Jefferies Finance to shift this valuable IP, known collectively as “BrandCo IP”, to subsidiaries in order to issue new loans displacing the UMB lenders’ claim on the collateral.
The bank alleges the transferred IP was immediately leased back to Revlon so that “it could continue using the BrandCo IP as if the financial machinations had never taken place”. UMB Bank said that it was by now familiar with Revlon’s “pillaging techniques”, and responded by establishing a group of more than 50% of the 2016 credit agreement term lenders to object to, and block, the threatened 2020 transaction.
UMB Bank said: "This case is a stark example of a borrower that has ignored repeatedly its legal obligations to its lender." It added that COVID-19 offered no licence for Revlon to breach its contractual commitments to lenders or to steal and reuse collateral for alternative purposes. According to the suit, the 2020 transaction was “devastating” for the bank’s creditors and “that the bank’s term lenders must be placed back in the same position they would occupy” had Revlon not repeatedly breached its obligations under the 2016 credit agreement.
The lawsuit includes 22 causes of action, including breach of contract, fraudulent transfer, gross negligence and willful misconduct, conversion, unjust enrichment, and tortious interference with contract. UMB Bank has demanded that the defendants admit to breaching the 2016 credit agreement; a rescinding of the 2020 loan or that it is rendered void; and undisclosed damages.
Revlon and UMB Bank have been approached for comment.
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