Avon Products' bankruptcy estate has filed a disclosure statement detailing its proposed liquidation plan, which would establish a $14 million cash fund for general creditors while creating a separate recovery mechanism for thousands of talc-related injury claims. The plan represents the final chapter for the once-iconic beauty company's U.S. operations following the sale of its assets to parent company Natura &Co.
Filed on April 28 with the U.S. Bankruptcy Court for the District of Delaware, the disclosure statement outlines how AIO US, Inc. and its affiliated debtors, including Avon Products, Inc., will distribute approximately $31.5 million in cash and potential proceeds from insurance rights and causes of action among creditors through a liquidation trust.
"The Debtors' main objective in the chapter 11 cases has been to propose and consummate a chapter 11 plan that distributes their remaining value to their creditors as soon as reasonably possible and in a fair and efficient manner," the filing states.
The plan divides claimants into two primary voting classes: Class 3 (General Unsecured Claims) for noteholders, trade vendors and other non-talc creditors, and Class 4 (Talc Claims) for personal injury claims related to talc in the company's former products. The structure reflects the significant impact talc litigation had on driving the company into bankruptcy, with approximately 386 individual talc-related cases pending when Avon filed for Chapter 11 protection in August 2024.
Under the proposed plan, Class 3 creditors would receive a unique option: they can either accept a more certain cash recovery from a $14 million "GUC Recovery Fund" (capped at 37.5% of their claim amount) or elect to pursue potentially higher but more uncertain recoveries alongside talc claimants from a fund that will primarily contain proceeds from insurance rights and litigation.
"The election can be viewed as a choice between (a) cash in a more certain amount payable on or shortly after the Effective Date, and (b) sharing in the value of the ALT Assets, which has the potential to be higher, but is more uncertain than the Cash recovery from the GUC Recovery Fund, and the distribution of which may take years," the disclosure statement explains.
For talc claimants, the plan establishes a framework with scheduled values based on disease type. Mesothelioma claims would receive a $10,000 scheduled value under an expedited review process, with a $3 million maximum value possible under individual review. Other disease claims would undergo individual review with potential payments up to $6,000. Pre-petition liquidated claims, including unpaid verdicts and settlements, would be allowed at their full amount, including interest.
Two significant talc lawsuits hang over the estate: a $24.5 million verdict in the Ramirez case from July 2024 and a $36 million compensatory damages and $10 million punitive damages verdict in the Chapman case, which is secured by a $75.5 million appeal bond and currently on appeal.
The plan follows a global settlement reached with Natura in December 2024, which provided significant value to the estates, including a $34 million cash payment, waiver of approximately $631.7 million in secured claims, waiver of over $400 million in unsecured claims, proceeds from a Rabbi Trust (approximately $25.9 million), and assumption of Avon's underfunded pension plan.
The liquidation plan stems from the debtors' August 2024 bankruptcy filing, which came after years of operational challenges and mounting talc litigation costs. At the time of filing, the debtors were U.S. holding companies with no domestic operations, having sold their North American business in 2016 to what is now owned by LG Household & Health Care Ltd.
"The Debtors have incurred more than $225 million in defending personal injury lawsuits and settlement payments in connection with Talc Claims," the disclosure statement notes. "The Debtors do not have sufficient liquidity to litigate or settle hundreds of cases and expect that the number of cases filed against the Debtors will only continue to increase absent a permanent solution."
The liquidation process will be managed by a trustee, whose identity is yet to be finalized. The Committee has proposed an initial Liquidating Trustee who is acceptable to the Debtors, according to the filing.
Looking ahead, the disclosure statement outlines key dates in the confirmation process. The voting deadline and plan objection deadline is June 20, 2025, with a confirmation hearing scheduled before Judge Craig T. Goldblatt on July 1, 2025. If confirmed, the plan is anticipated to become effective on July 8, 2025.
The debtors are represented by Weil, Gotshal & Manges LLP and Richards, Layton & Finger, P.A. The Official Committee of Unsecured Creditors has been represented by Cooley LLP, Caplin & Drysdale, Chartered, and A.M. Saccullo Legal, LLC.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 153 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.