Tupperware lenders fight over assets as company files for bankruptcy | World News

Other questions currently being debated include whether Tupperware should attempt a restructuring at all or whether a group of aggressive distressed debt investors should simply foreclose on the brand, its inventory and other assets.

“Faced with increasingly urgent liquidity needs and ongoing operational pressures, the Company resumed its marketing efforts for the third time following the Fourth of July weekend,” restructuring chief Brian J. Fox said in court documents.

Tupperware's business problems are not new, but they have resurfaced in bankruptcy court as well-known lenders such as Stonehill Institutional Partners and Alden Global Capital have stepped in.

The company's sales have been on a downward spiral for nearly a decade as its model of independent representatives hosting “Tupperware parties” to sell goods, mostly in the suburbs, was upended by cheaper online options and cultural changes.

Although Tupperware warned last year of a threat to its viability, sales briefly rose due to the pandemic as people had to cook more at home and then store leftovers. A meme stock rush last year also provided fleeting optimism about Tupperware's future.

For example, when Tupperware lifted restrictions on trading its debt over the summer, new players entered the market in July. Investors such as Stonehill and Alden bought up most of the company's senior debt for just three cents on the dollar, filings show.

Conditions

New lenders offered Tupperware more money, but with strings attached. The $8 million they lent only brought the company $6 million in fresh cash, and that was because of strings that favored the lenders, court records show.

That bridge loan prompted at least one lender to file suit in New York, claiming it was wrongfully excluded from the lucrative debt deal orchestrated by Stonehill and Alden.

Meanwhile, Tupperware was trying to negotiate with Stonehill, Alden and the other lenders to sell some assets – including its famous name. The main point of contention was whether the company should restructure its debt under court protection or in a simple foreclosure process, according to letters the company and lenders exchanged over the past two weeks.

Court documents show that lenders urged Tupperware to avoid bankruptcy and instead accept a simple foreclosure. Lenders claimed Tupperware executives pushed for a U.S. Chapter 11 proceeding to protect themselves from potential lawsuits, a common protection sought in corporate bankruptcies.

Representatives for Tupperware and the lenders did not respond to requests for comment.

Tupperware countered that a foreclosure would give lenders all of the company's most valuable assets and exclude other creditors. Those lower-ranking creditors would have no chance to fight for a payout on their own, Tupperware wrote in a letter to lenders.

After a final exchange of letters last weekend, Tupperware filed for bankruptcy, ignoring the promise of its lenders to resist reorganization under the US Chapter 11 procedure and instead push for liquidation.

The company attributed its recent crisis to the aggressive tactics of the new lenders.

Airtight seal

Tupperware founder Earl Tupper introduced his plastic products to the public in 1946 and subsequently patented the flexible, airtight closure. Tupperware products later found their way into American households, mostly through independent distributors, and helped the company achieve market dominance for decades.

When the parties were over and competition became tougher, Tupperware's iconic products faced waning demand as the company couldn't keep up with the changing pace of retail.

The Covid pandemic caused a brief increase in sales, but the increase in the number of people eating at home and buying Tupperware products did not last long.

By 2022, Tupperware still relied largely on direct sales through an army of 465,000 amateur salespeople and 5,450 employees. But shoppers were increasingly buying similar—and often cheaper—products online. They went directly to Amazon or Walmart, and those who wanted to avoid buying more plastic goods could find similar containers made from more environmentally friendly packaging.

The following year, Tupperware was caught up in the meme stock hysteria. A staggering share price masked many of the underlying problems and held up despite the company itself warning that there were significant doubts about its continued existence.

Creditors gave the company some breathing room, but sales continued to decline. In June of this year, Tupperware planned to close its only factory in the United States and lay off nearly 150 employees.

After years of searching for a buyer, the highest offer would cover less than 20 percent of the $800 million Tupperware owes senior lenders, court documents show.

“This process is intended to provide us with the flexibility we need as we pursue strategic alternatives to support our transformation into a digital, technology-driven company that is better positioned to serve our stakeholders,” Laurie Ann Goldman, Tupperware's president and CEO, said in a statement late Tuesday.

The case is Tupperware Brands Corp., 24-12156 U.S. Bankruptcy Court, District of Delaware (Wilmington).

First published: September 19, 2024 | 9:36 a.m. IS