The former owner of Zest soap and Alberto VO5 hair-care products is at the center of a bankruptcy court lawsuit accusing buyout firm Clayton Dubilier & Rice LLC of hiding investment risks during a $250 million bond offering, WSJ Pro Bankruptcy reported. Bond buyers thought in March 2017 that they were investing in a financially strong High Ridge Brands Co., but they didn’t know that private-equity backer Clayton had expressed doubts internally about the portfolio company just weeks before, according to a bankruptcy-court lawsuit unsealed last month. The month before the bonds were sold, a fund partner allegedly called High Ridge’s performance one of the firm’s “worst misses” in more than a decade. High Ridge used the $250 million bond to repay $93 million in debt owed to a Clayton-owned lending vehicle. High Ridge filed for chapter 11 in 2019 and sold virtually all of its assets, but a liquidating trustee is trying to recover money for unpaid bondholders in the bankruptcy. On Friday, Clayton filed papers asking for the lawsuit to be dismissed, saying it is without merit and is based on emails that were taken out of context. The firm also said the $250 million bond benefitted High Ridge, refinancing debt and lowering its interest rate. The liquidating trustee, Alan Halperin, alleged that Clayton omitted key information from an offering memorandum for the bonds, including that in January 2017 High Ridge fired its sales chief and that Walmart changed its store layout in a way that moved a High Ridge body wash away from eye level.
