FOLLOW US

Avon Products Inc. has filed for Chapter 11 bankruptcy protection in Delaware to address over $1 billion in liabilities, including numerous injury claims related to talc in its products. The iconic beauty company, alongside three affiliates, submitted its bankruptcy petitions late Monday, citing financial distress and ongoing litigation as key factors driving the decision.

Avon Products Files for Chapter 11 : Talc-Related Lawsuits and Financial Woes

Avon Products filed for Chapter 11 in response to hundreds of pending lawsuits alleging that its talc-based products caused asbestos exposure, leading to severe health issues such as mesothelioma. The company faces approximately 386 pending injury claims, with notable cases including a $24 million verdict in Illinois and a $46 million liability from a California verdict in 2022. Avon has already incurred $225 million in defense costs, according to court filings. "Although the debtors believe the talc claims are without merit, the debtors do not have sufficient liquidity to litigate and/or settle hundreds of cases and expect that the number of cases filed against the debtors will only continue to increase absent a permanent solution," said Philip Gund, Avon's Chief Restructuring Officer, in his declaration.

Sale of Non-U.S. Operations to Natura & Co.

As part of its restructuring efforts, Avon announced an agreement to sell its non-U.S. operations to Brazil-based Natura & Co., which acquired the company in 2020. The deal involves a $125 million credit bid, with Natura also agreeing to provide $43 million in Chapter 11 financing to support Avon's bankruptcy process. "Today's action and the proposed sale of Avon's non-U.S. operations will maximize the value of our assets and enable us to address our obligations in an orderly manner," said API Chairperson John Dubel in a statement. Natura has also pledged to settle any claims against it by Avon with a $30 million cash payment, the waiver of $530 million in debt, and the assumption of costs related to the appeal of the California verdict, as well as the company's defined-benefits retirement plan.

A Legacy Business Facing New Challenges

Founded in 1886, Avon is renowned for its "Avon lady" sales model, which accounted for 87% of its net revenue in 2023. Despite its historical success, Avon has struggled with declining revenues in recent years, attributed to inflationary pressures, the COVID-19 pandemic, the war in Ukraine, and increasing competition. Avon Products filed for Chapter 11 to restructure its operations and address its liabilities, with Ankura Consulting Group serving as its financial adviser and Rothschild & Co as its investment banker. The company is legally represented by attorneys from Richards Layton & Finger PA and Weil Gotshal & Manges LLP.