Avon files for bankruptcy in the US over talc-related debts and lawsuits

Avon Products Inc. (API), a non-operating holding company of the renowned cosmetics brand Avon, has decided to voluntarily file for Chapter 11 of the United States Bankruptcy Law. The request was made in a Delaware court, as part of an effort to manage the company's growing debt, estimated at around $300 million, and to face hundreds of lawsuits related to its talc products.

These lawsuits allege that the use of talc has caused cancer in consumers, which has generated significant pressure on the company.

Despite not operating directly in the US market since selling its North American business to Cerberus Capital in 2016, Avon Products Inc. remains the parent entity for the brand's operations in international markets outside the US. The Avon brand in the United States, known as "The Avon Company" and currently owned by LG Household & Health Care Ltd., is not involved in this bankruptcy process, nor is it affiliated with Avon Products Inc.

Brazilian group Natura & Co, which acquired Avon in 2020 and is API's largest creditor, has shown its financial support to the company during this process. Natura & Co has agreed to provide $43 million as a debtor-in-possession (DIP) to ensure that Avon Products Inc. has the necessary liquidity to continue with its obligations during the bankruptcy proceedings.

In addition, Natura & Co has signed an agreement to acquire Avon's equity interests in operations outside the US for $125 million, subject to a court-supervised auction process.

The Chapter 11 bankruptcy process in the U.S. offers companies the chance to restructure their debts and reorganize their operations under court supervision, with the goal of balancing the interests of debtors and creditors. In this case, the procedure is expected to allow Avon Products Inc. to resolve its financial problems while protecting its assets and operations outside the United States.