My, how are the mighty fallen. Revlon, a venerable 90-year-old cosmetics company, filed for bankruptcy protection this week, in what might be the start of a wave of big insolvencies to result from a litany of economic headwinds.

The New York-based company, which also owns brands Elizabeth Arden, Britney Spears Fragrances and Almay, is mired in about $3.7 billion in debt, or about $1.4 billion more than it has in assets, according to its bankruptcy petition. The company is controlled by billionaire Ron Perelman’s MacAndrews & Forbes, which holds an 84.8% equity stake, according to the court filing. 

After a post-Covid lockdown boom, the economy appears to be going bust as inflation skyrockets and the stock market (as well as crypto currency markets) sink. While bankruptcy courts have been relatively quiet over the past couple of years, more big cases could be headed their way as companies start to struggle with liquidity shortfalls.

As we gird ourselves for more bankruptcy filings, we want to point out three things worth paying attention to in the Revlon case.

1. Supply chain woes were a big factor

While Revlon’s mounting debt load certainly contributed to its predicament, what really sent it into a tailspin was the cost of managing supply chain disruptions, according to documents filed by the company. As a result of these rising costs, the company faced a liquidity shortfall of more than $300 million. 

Supply chain snarls have impacted a wide range of companies severely over the past year, with consumers feeling the pain when they try to buy everything from cars to computers to cream cheese. Many of the vital ingredients for a wide range of durable goods and consumer products are sourced from only a handful of locations around the world.

Tighter supplies, resulting from lockdowns and transportation delays, meant that Revlon was forced to pay more for its makeup ingredients.

2. Revlon was moving in a positive direction earlier this year

Although some media outlets speculated that the company’s struggles might have to do with a growing proliferation of direct-to-consumer startups like Glossier, Revlon has been holding its own. 

The company’s sales rebounded strongly in the first quarter of this year, compared with the same period in 2021, rising 7.8% to $479.6 million. Though its net loss was $67 million, that narrowed substantially from a loss of $96 million in the first quarter a year ago. 

Revlon experienced its “best Q1 Adjusted EBITDA in six years,” the company’s president and CEO Debra Perelman said in May, when the financial results were released.

Meanwhile, Glossier, the heavy-hitter among direct-to-consumer makeup startups, has had a bumpy ride over the past year. The millennial and Gen Z darling laid off 80 employees in January after facing complaints about racism and a toxic work culture. 

As far as hiring goes, Glossier was in much worse shape than Revlon over the past few months, according to data from Thinknum on job postings for each company. 

3. A weird loan snafu with Citibank may factor into the case

Remember a wacky story from 2020 about Citibank accidentally paying Revlon creditors almost $900 million because of a data entry error? Well, the incident, which was a huge black eye for Citibank, may also reemerge in the bankruptcy case.

The loan amount, which wasn’t due until 2023, was part of a package which helped finance Revlon’s 2016 purchase of Elizabeth Arden. Citibank arranged the loans. After the big payment snafu, the bank tried to claw back the $900 million but was taken to court by the creditors. 

A federal district court judge ultimately allowed some of the creditors to keep $504 million of the accidental overpayment, and the ruling has been appealed. If it stands, Revlon will have fewer debts to worry about.