(Bloomberg) -- TPG-backed skincare company Rodan & Fields is in talks to hand control of the company to creditors and receive fresh cash, according to people with knowledge of the situation.
The company is in discussions to receive a new $75 million second-lien term loan and swap existing debt for new, longer-dated obligations as part of a deal that would also rework the creditor payout pecking order, said the people, who asked not to be identified discussing a private matter.
Lenders who provide the new loan will receive best terms on the debt exchange, followed by those who consent to the swap. Non-consenting lenders could be pushed back as far as sixth-lien position, the people said.
The new loan has a proposed interest rate of 850 basis points over the benchmark payable in cash and in-kind and would mature in September 2029, the people added.
A representative for TPG declined to comment. Rodan & Fields and its adviser Jefferies Financial Group Inc. didn’t respond to messages seeking comment.
Lenders who don’t participate in the new loan will be asked to swap their holdings into a new third-lien loan at a 30% haircut, while those who do provide new money can exchange at par, the people said. Other lower-ranking lenders can receive a new fourth-lien loan and common equity.
Rodan & Fields was founded by two dermatologists and offers skincare and haircare products and an eyelash growth serum. TPG invested in the company in 2018, but in the years since, the company has faced dwindling revenue and earnings and a shrinking base of independent sellers under its multi-level marketing model. It previously restructured its debt last year in a deal that extended certain loans and gave participating lenders additional collateral.
The 2023 restructuring left the company with a small slug of older debt maturing in 2025. Under the new deal, holders of those obligations can sell the loans for 10 cents on the dollar in cash, swap into the fourth-lien loan for 25 cents or be relegated to sixth-lien position, essentially the very back of the repayment line.
Rodan & Fields has historically operated as an MLM, which rewards sellers for recruiting others to the business. This week, the company said it would transition away from the MLM model by boosting sales commissions and discounts while ceasing to compensate sellers for recruits’ sales.
Moody’s Ratings downgraded the company to C — its lowest rating outside of default — in May, citing “heightened liquidity and default risks,” high competition, changing consumer shopping patterns and “the reduced attractiveness of the business opportunity as an independent consultant.”
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