By Steven Church | Bloomberg
Tupperware’s first day in bankruptcy court hit a sour note as the 78-year-old company that’s synonymous with storing leftovers was forced to delay paying 465,000 door-to-door contractors because of a spat with lenders.
The standoff threatens to quash Tupperware’s revival plans before the company has a chance to hold a court-supervised auction designed to attract investors willing to save the money-losing business. That’s because Tupperware has only $7.4 million in cash, but it can’t spend any of it without approval from lenders. It owes its traveling contractors $1.4 million in commissions.
“That’s like saying you have only $1.50 in the bank,” said Thomas J. Salerno, a bankruptcy attorney who is not involved in the Tupperware case. “That’s incredibly unusual. It’s nothing, for a case of that complexity with that much debt.”
Lenders — including Bank of America and the hedge funds affiliated with Alden Global Capital and Stonehill Institutional Partners — have refused to let Tupperware spend the money. Instead they asked US Bankruptcy Judge Brendan Linehan Shannon to throw the company out of bankruptcy, an unusually aggressive move in a case with thousands of jobs on the line and more than $800 million in unpaid debt.
If lenders succeed, they would wind up foreclosing on the company, cutting short any sale process.
“You don’t see that happen very often,” Salerno said.
The company was in court Thursday in Wilmington, Delaware for a preliminary hearing. Under normal circumstances, Shannon would given the company permission to pay its employees and critical suppliers. But because of the opposition from lenders, Tupperware must return to court in the coming days to ask Shannon to overrule the restrictions on the $7.4 million. The money is considered collateral on the $800 million owed to lenders.
“Until the hearing next week, we will plan to live without making any payments,” company attorney Spencer A. Winters told Shannon.
The lenders fighting Tupperware are owed more than $460 million, giving them a majority of the company’s long-term debt.
They claimed there is no chance any buyer will want to take on Tupperware, which has spent at least the last 17 months trying to find a suitor.
Should Shannon agree to either dismiss the Chapter 11 bankruptcy case, or convert it to a liquidation proceeding, the lenders would be able to get control of Tupperware much faster and without spending as much on legal fees.
The company filed bankruptcy earlier this week after years of financial trouble.
Downfall
Tupperware founder Earl Tupper introduced its plastic products to the public in 1946, and subsequently patented their flexible airtight seal. Tupperware’s goods later flooded into American homes, largely through independent sales parties, helping the company dominate the market for decades.
The company’s iconic products faced weakening demand as competition heated up and Tupperware failed to keep up with the changing pace of retail.
The Covid pandemic briefly juiced sales, but the increase in people eating at home and buying Tupperware products didn’t last long.
By 2022, Tupperware still largely relied on direct sales by an army of 465,000 amateur vendors and 5,450 employees. But shoppers were increasingly buying similar — and often cheaper — products online. They were going 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 case is Tupperware Brands Corp., 24-12156 US Bankruptcy Court, District of Delaware (Wilmington).
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