Avon Products Inc (API), the owner of the iconic Avon brand in the UK, Europe, and Latin America, has filed for Chapter 11 bankruptcy protection in the US. The move is aimed at restructuring its debt burden, which exceeds $1 billion, including liabilities linked to talc-related lawsuits.
API, a subsidiary of Brazilian cosmetics giant Natura, has struggled financially since its acquisition of Avon's non-North American operations in 2020. The company has cited the mounting costs of defending against talc-related lawsuits as a key factor contributing to its financial distress.
Natura has proposed a $125 million buyback of Avon's non-US operations, pending the completion of the bankruptcy process. The proposal will undergo a court-supervised auction to determine its success.
Despite the bankruptcy filing, Avon's operations in the UK, Europe, and Latin America will continue as usual. The company assures that no job cuts are anticipated.
The bankruptcy highlights the challenges faced by companies grappling with substantial debt and litigation costs. In the case of Avon, the acquisition of its non-North American business by Natura seems to have contributed significantly to its financial difficulties.
Natura, itself grappling with its own financial issues, has taken steps to alleviate its debt burden, including the sale of The Body Shop and Aesop. The company has also put its plans to demerge Avon on hold amidst the bankruptcy proceedings.
