Last time we checked in on billionaire Ron Perelman, he was busy firing, furloughing, or losing people at his holding company, MacAndrews & Forbes, and trying to sell as many of his assets that aren’t tied down as possible. The question, of course, is why a guy who was once worth nearly $20 billion and is now listed by the Bloomberg Billionaire’s Index as still worth $7.6 billion is acting like he’s closing up shop after some 40 years as a prominent Wall Street wheeler-dealer.
There is no shortage of theories, of course.
There have been questions raised by those who know him about his physical health, what with COVID-19. Some cite as evidence that the 77-year-old mogul is slowing down the fact that after 10 years, Perelman last August ended his annual boffo fundraiser for the Apollo Theater at his massive Hamptons estate, the Creeks. But that notion seems to have been debunked. “It’s not health,” says someone who knows him well. “It’s not health.” He has good genes. His father, Raymond, lived to be 101.
Then there have been the inevitable questions about his financial health. “It’s financial troubles,” says the person. And another adds, “This guy is going bankrupt, I’m told. Like it’s quite a big thing and a thing no one has written about.” (A source familiar with Perelman’s finances says, “There is no danger of him going bankrupt.”) Perelman also happens to be busy shedding people at MacAndrews & Forbes. He recently ousted the holding company’s chief financial officer, Paul Savas, and both its general counsel, Steve Cohen, and Josh Vlasto, its head of communications, left for new opportunities. Cohen’s deputy, Michael Bosworth, also left in July for a private law firm. (Fran Townsend, a longtime MacAndrews & Forbes executive, has assumed Cohen’s duties.) But the departures at MacAndrews & Forbes go deeper than these four senior executives. One source tells me Perelman also furloughed “hundreds of employees” in and around June—meaning they intend supposedly to bring people back at some point—and then cut off their health care benefits in the middle of the pandemic. That’s “a true, bad guy thing,” this person says.
MacAndrews & Forbes is a private company and Perelman is its 100% owner. There is debt at the MacAndrews & Forbes level, I’m told, but how much, who the lenders are, and when that debt comes due is anyone’s guess. None of the MacAndrews & Forbes debt shows up on the Bloomberg terminal and the hedge fund crowd that normally would be expected to know about the debt, or trade it or buy it, is equally clueless. His outside spokesman at Rubenstein declined to provide details about the debt Perelman owes at the MacAndrews & Forbes level. But someone familiar with Perelman’s finances says that Bloomberg’s calculation of Perelman’s net worth—the $7.6 billion—is misleading because it doesn’t account for the money he owes and is coming due at the holding company. A closer examination, this person says, will show “that $7 billion is not quite right.” So let’s take that closer look.
First, there is Revlon, the cosmetics giant that Perelman has owned since 1985 and is run by his daughter Debra. He now owns about 87% of the stock of the company, worth around $375 million these days. Perelman hired Goldman Sachs to sell the company last year and, according to a recent filing with the Securities and Exchange Commission, Goldman is still working it, although who the credible buyers are is not exactly clear. In May, Revlon completed a $1.8 billion senior debt refinancing, designed to give the company more breathing room with its lenders. It’s also in the middle of a coercive exchange offer on $500 million of its senior notes, designed essentially to push out the time frame on when the debt is paid back rather than any meaningful debt reduction. In an August 5 note, Moody’s estimated Revlon’s debt at $3.6 billion and continues to rate it in the “junk” category, meaning the risk is high that the debt gets paid back. “Revlon continues to incur a meaningful cash burn and we continue to view leverage and the capital structure as unsustainable,” Moody’s wrote. It estimated that because of Revlon’s “cash burn” and “earnings deterioration”—offset by modest debt reduction from the refinancing—the company’s financial risk will increase materially. “We estimate that pro-forma debt to EBITDA will be 14x based on the post transaction debt structure outlined in the company’s offering memorandum [for the exchange offer]—a level that is higher than 12.7x for the twelve-month period ended March 31, 2020,” Moody’s wrote. “We estimate debt to EBITDA will reach a high of 18x over the next 12 months.”