RON-NING ON EMPTY By CHRISTOPHER BYRON
nypost.com
November 15, 2004 -- THIS week we answer the question that all America has been asking: How much game has the Ronster got left?
Everyone wants to know because if Rockin' Ron Perelman can keep pushing back the brink for one bony-shouldered billionaire, think of what that means for all the rest of us, out here in the bleacher seats of high finance.
Unfortunately, when it comes to the old razzle-dazzle at mid-court, the Finagle King of Wall Street seems to be losing his touch, and after the Ronster, what then? Le deluge?
Latest sign of Ron's woes: His choice of two obscure penny-stock shops from the West Coast to underwrite an IPO for a piece of American Stock Exchange road-kill called Nephros Inc. that he controls.
We'll get to the details of the deal in a minute, for they suggest what may by now have become a very real problem for Rockin' Ron: in this town at least, the word on the Ronster is out, with the result that fewer and fewer people seem willing to do business with him unless they absolutely have to.
But before exploring the price one pays for a lifetime of shaking hands with your fingers crossed and mirrors on your shoes, let's first turn to yet another of the Ronster's troubled pursuits — that of Revlon Corp. — which last week offered up some quarterly financials that all the razzle-dazzle on earth may not now be able to fix.
This once-great cosmetics empire, the creation of the late Charles Revson, was taken over by Ron at the height of the 1980s junk bond craze, following which he began running the company less as a perfume and lipstick business than as a financing vehicle to help prop up the rest of his Rubic's Cube-like empire.
Though the Ronster has periodically unfurled plans for Revlon restructurings of one sort or another, they've amounted to little more than plant closings and layoffs as the company has pin-wheeled toward oblivion.
Along the way, top-line revenues have tumbled by 42 percent, nearly two thirds of the company's 14,300 employees have been axed, cash flow has evaporated, and the company's balance sheet has been destroyed as cumulative losses have soared to more than $2 billion.
LAST week brought more of the same, with the company reporting another 7 percent slide in top-line revenues during the July-Sept. period of 2004 from the same period of 2003, while another $36.4 million of cash flew out the window to keep the company open for business.
In the North American market (U.S. and Canada), where two-thirds of Revlon's business is based, the bloodletting was even worse, with revenues tumbling nearly 10 percent during the quarter. And when you factor out currency fluctuations, the slide in international sales was nearly five times worse than it seemed.
Here and there in the financials, it is possible to find hints of improvement in last week's numbers. They showed, for example, that Revlon's operating losses shrank by nearly 75 percent during the quarter, which certainly sounds impressive. But there's less to the apparent improvement than meets the eye, because nearly all of it flows from having trimmed close to $20 million from administrative and corporate overhead during the period.
The balance sheet also looks better than it did a year ago, with long-term debt having been cut by roughly $500 million, and the payback dates on much of the remaining $1.34 billion getting pushed off to the end of the decade.
But once again, the improvement is more apparent than real, the result of a debt restructuring deal at the start of 2004 in which the Ronster, his back to the wall, agreed to buy back the debt by having Revlon issue its lenders 224 million shares of new stock, thereby diluting his near-total ownership of the company to 60 percent of the company's total outstanding stock.
All of which may well help explain why the Great Finagalus had to turn to a San Francisco outfit called The Shemano Group to tee up an IPO for a room-emptying stock deal he'd become entangled in.
The deal in question, for a company called Nephros Inc., which claims to have come up with some new secret way to kick-start failed kidneys, has been clanking along behind the Great One for years now.
THE notion of a new way to treat end-stage renal disease appar ently appealed to both the Ronster and moneyman biggie Bruce Wasserstein, who each chipped in a few bucks to help get Nephros going as a development-stage medical technology start-up. But for whatever reason, they eventually tried to cash out, and in 2002 turned to a Florida investment shop called GunnAllen Financial to put together a stock stale.
GunnAllen was certainly an odd choice as an exit door for the two Wall Street richies — especially when one considers the firm's well-publicized ties at the turn of the decade to a Mafia-infiltrated brokerage firm in Tampa, Fla., called Sovereign Equities, which is now defunct.
It also seemed a case of exceedingly poor judgment when the Ronster's top aide de camp and official food taster, Donald Drapkin, invited hedge fund uber-swindler Michael Lauer to join the Nephros festivities via a private placement from one of his now-defunct Lancer funds, which were shut down in the summer of 2003 by an emergency order from the Securities and Exchange Commission.
The stock sale was shelved, and Nephros sank from view. Nearly a year passed, and by the time Nephros was next heard from this last summer, the Ronster at least was now much deeper in the hole, having picked up more than $6.7 million in bridge loan financings.
Though $6.7 million may have been mere pocket change for the Ronster back in his 1990s glory days when Institutional Investor magazine was proclaiming him America's richest man, by the summer of 2004, $6.7 million had become real money.
So it is again perhaps a measure of his sinking reputation on capitalism's street of dreams that to make a second stab at a stock sale the Ronster should next have turned to a nearly-unknown San Francisco brokerage firm called The Shemano Group, whose affiliated entity Shemano Capital Markets is currently facing California state charges for running an illegal and unlicensed investment firm out of the same offices that house the brokerage operation.
Reached in Hawaii last week as he was preparing for a massage, the firm's founder and chairman, Gary Shemano, said he has no idea what the state of California is so torqued up about, and that the whole thing boils down to a small clerical oversight by someone in his office.
But Shemano sounded less convincing when asked to explain why, as lead underwriter in the Nephros deal, he had been joined by a Seattle-based firm called National Securities Corp. as the offering's co-underwriter. At one point Shemano explained that National Securities had approached the Shemano Group, and at another point he seemed to say that it had been the other way around — though with his thoughts perhaps addled by the approaching massage, he may simply have been confused.
In either case, National Securities hardly seems best choice for a partner. The firm was fined $600,000 just this last August by the National Association of Securities Dealers for deceptive market-timing practices involving trading in mutual funds.
And, like GunnAllen, it has been publicly linked at least once to a Wall Street bucket shop involved in hard-core crime — in National Securities' case, as the successor entity to a firm called Sharpe Capital Inc., which collapsed in 2000 after news stories showed traders at Sharpe to have been actively involved in drumming up business by supplying cocaine to favored clients.
This is the world into which the Great One has now sunk? As we are reminded in the Random House Book of Poetry for Children, "Even kings have underthings." So it seems.
*Please send e-mail to: cbyron@nypost.com |
