Avon: Owner of UK business files for bankruptcy amid huge $1bn debt and talcum power cancer allegations

Avon Products Inc (API), which owns the UK, Europe and Latin America businesses and is a subsidiary of Brazilian beauty conglomerate Natura, has filed for Chapter 11 bankruptcy. As reported in the Retail Gazette, the decision to acquire bankruptcy protection was made to ward off the impact of upcoming lawsuits and debt pressures.

API said it would allow the company to meet its debt obligations in an “orderly manner”. Natura has proposed to buy back its trading operations outside the US for $125m (£97m) after the bankruptcy process is complete.

The news comes amid a host of legal action against various cosmetic brands, with Avon facing 100 claims. Lawyers allege there is a link between cancer and talc, which is used in Avon eye shadows and face powders. The beauty retailer has denied the allegations, insisting it has only used “cosmetic grade talc” in its products “which has been tested to confirm that it does not contain asbestos”.

The Guardian reports API has spent $225m in costs defending itself against personal injury lawsuits and settlement payments and said it does not have “sufficient liquidity” to defend or settle the 386 individual talc-related cases. Total debts are valued at $1.3bn and liabilities relating to talc claims worth $78m.

The company is known for the “Ding dong! Avon Calling” slogan, which was retired in the 1960s. It has operated a door to door sales model for much of its life. Late last year, the company said it planned to open physical stores in the UK. Sale representatives would have run “mini beauty boutiques” as franchisees. Avon’s UK operations will continue to trade and no job cuts are expected.

Kristof Neirynck, the chief executive officer of Avon, told the national publication: “We remain focused on advancing our business strategy internationally, including modernising our direct selling model and reigniting the brand to accelerate growth.” Natura said it would support the bankruptcy process with up to $43m in funds and had also put forward a $125m bid to buy back the trading operations in Europe, Asia and Latin America. If Natura is successful, it will control Avon’s businesses.