Avon Products Inc (API) has filed for bankruptcy after struggling with huge debts and ongoing lawsuit liabilities. Its problems include millions of dollars of potential claims due to allegations that the talc in Avon products could potentially cause cancer in users.
Avon Files for Bankruptcy Amid Cancer Lawsuits
API owns the Avon beauty brand in Europe and Latin America and is a subsidiary of the Brazilian company Natura. The North American operations are run by the South Korean company LG Household & Health Care, which isn’t involved in the current bankruptcy proceedings.
API is said to have over $1bn in debt and has filed for Chapter 11 administration, with Natura proposing a buyback of the non-US operations for $125m once the process is complete. In the meantime, it plans to support the bankruptcy process with $43m.
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The injury lawsuits and settlements have already cost $225m. The company now says it no longer has the necessary liquidity to defend itself in court or pay settlements in the 386 cases related to talc usage that are still outstanding. No job losses are expected among the 5,000 employees working for API.
Chairman John Dubel said:
Today’s action and the proposed sale of Avon’s non-US operations will maximise the value of our assets and enable us to address our obligations in an orderly manner.
With a history going back more than 130 years in the UK, Avon planned to open physical stores in the country for the first time. The idea put forward last year was for its sales reps to run mini beauty boutiques on a franchise basis.