Rodan & Fields has engaged Jefferies to explore financing options amid a sales slump, according to people with knowledge of the situation.
(Bloomberg) — Rodan & Fields has engaged Jefferies to explore financing options amid a sales slump, according to people with knowledge of the situation.
The multi-level marketing company has flexible credit agreements that would allow it to pursue various actions, such as moving assets to a subsidiary to raise new money, the people said.
Its hunt for fresh capital came as negotiations with a lender group led by Oaktree Capital Management broke down over pricing differences, the people said. Oaktree, the largest lender by far, has been working with Milbank and began confidential debt talks with TPG earlier this month.
A representative at Rodan & Fields didn’t respond to requests for comment. TPG, which acquired a minority equity stake in 2018, Jefferies and Oaktree all declined to comment.
Rodan & Fields proposed to amend and extend maturities of existing debt at a 20% discount to the lender group and 30% to other lenders, the people said. The firm has a revolver due June 2023 and a first-lien term loan due 2025.
Meanwhile, the lender group offered to provide a super-priority loan and to extend existing debt maturities at a 5% discount, the people said. Reorg previously reported on elements of the debt proposals and Jefferies hire.
While Rodan & Fields views it has ample liquidity, it is open to ways to improve its flexibility, they said.
In July, Rodan & Fields drew $30 million on its revolver to cover a settlement related to its Lash Boost eyelash growth serum, and is capped at another $4 million in borrowings due to a leverage test, S&P Global Ratings wrote on Aug. 24. That means the company is reliant on $89 million of cash to cover its needs over the next 12 months.
The company’s second-quarter revenue dropped 29% compared to last year, marking the third year since it has seen a double-digit sales decline from its peak in 2018, S&P said. This may be due to increased competition in the skincare industry, such as newer digital competitors and investments from heavyweights like Estee Lauder and L’Oreal.
During a call with private investors, Rodan & Fields management said the company is on track to reach its earnings budget this year, said one of the people.
The company’s first-lien loan is quoted at around 55 cents on the dollar, according to data compiled by Bloomberg.
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