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01 Feb 2011
Approximately $600 million in rated debt affected
New York, February 01, 2011 -- Moody's Investors Service placed Tupperware Brands Corporation's
("Tupperware") Ba1 rating under review for possible upgrade.
The action is based on the company's demonstrated and sustained operational
improvements over the past several years despite a weak economy,
its strong credit profile, and conservative financial policies.
The ratings review will focus on 1) management's strategy regarding growth
both organically and through acquisitions, and 2) the company's
debt capital structure and maturity profile given all its debt matures
The following ratings were placed under review for upgrade:
Corporate family rating of Ba1
Probability of default rating of Ba2
$200 million senior secured revolving credit due September
2012 of Baa3 (LGD 2, 19%)
$405 million senior secured term loan A due September 2012
of Baa3 (LGD2, 19%)
Loss Given Default ratings are not under review.
Tupperware's Ba1 corporate family rating is driven by its strong credit
metrics, favorable positions in attractive direct selling markets,
its portfolio of recognized brand names, excellent geographic diversification,
and a base of independent sales consultants that provides a significant
platform for growth, especially in emerging markets.
Notwithstanding these positive credit qualities, the rating reflects
the company's moderate scale, relatively narrow product diversification
and weaker market share position in the broader consumer product,
cosmetics and personal care sectors. The rating also considers
ongoing growth challenges of the direct selling model in mature markets
(Europe and the U.S.), its exposure to raw materials
and currency price volatility, sensitivity to discretionary spending
trends, competition from traditional and direct selling vendors,
and the potential for future acquisitions to supplement organic growth.
"Tupperware's operating performance and credit metrics have
improved despite the global economic downturn reflecting its excellent
geographic diversification, portfolio of recognized brand names,
favorable position in attractive direct selling markets and conservative
debt management," says Moody's Vice President and Senior
Credit Officer Janice Hofferber, CFA.
Tupperware's overall profitability has significantly improved despite
higher resin prices and other key commodities with gross and EBITA margins
exceeding 67% and 15%, respectively for the period
ending September 2010.
The company's organic sales growth continues to outperform with 2010 fourth
quarter and full year local currency sales up 6%. Management
expects 2011 local currency growth to range between 6-8%,
supported by its diversified geographic portfolio of direct selling businesses
in attractive emerging markets combined with its track record of growing
its total sales force to record levels, despite a still weak consumer
environment in more mature markets in the U.S. and Western
Continuous investment in its portfolio of premium brands and strong top
line growth has supported margin improvements. As of the last twelve
months ended September 25, 2010, Debt to EBITDA was 1.7
times, down from over 1.9 times the same period the previous
year and from over 4.0 times following its 2005 acquisition of
Sara Lee's direct selling business. For the fiscal year ending
December 2010, we expect credit metrics to be consistent with the
nine month levels. Tupperware's announcement that it would
repurchase up to $160 million in shares throughout 2011 (plus proceeds
from stock options) reflects a more aggressive financial policy however,
its well positioned credit metrics including low leverage, a large
fiscal year-end cash balance, and expectation of good free
cash flow in 2011, provide financial flexibility. In addition,
subsequent repurchases will be dependent upon the company's ability
to meet its cash flow targets during the year.
Tupperware's could be upgraded to investment grade if the company can
demonstrate that it could maintain its strong operating performance in
an environment of large competitors and volatile macro-economic
conditions especially in certain emerging markets while sustaining strong
credit metrics including a Debt to EBITDA ratio sustained below 2.5
times and an Interest Coverage ratio above 4.0 times.
Given the review for possible upgrade, it is unlikely that Tupperware's
ratings would be downgraded. However, its ratings could face
downward pressure if global macro-economic or competitive conditions
resulted in lower profits and cash flows, or if the company were
to adopt a more aggressive stance toward financial policy or acquisitions
such that its Debt to EBITDA ratio was sustained above 3.0 times
and/or its Interest Coverage ratio declined below 3.0 times.
The last rating action regarding Tupperware was on September 12,
2008 when Moody's upgraded the company's corporate family rating to Ba1
and assigned a Speculative Grade Liquidity rating of SGL-2.
Moody's revised Tupperware's rating outlook to positive on
January 27, 2010.
For additional information, please refer to Moody's Credit Opinion
on Tupperware available on www.moodys.com.
The principal methodology used in rating Tupperware was the Global Packaged
Goods methodology which can be found at www.moodys.com in
the Ratings Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the rating process of rating Tupperware can also be found
in the Rating Methodologies sub-directory on Moody's website.
Headquartered in Orlando, Florida, Tupperware Brands Corporation
(NYSE: TUP) is a direct seller of premium food storage, preparation,
serving items and cosmetics and personal care products with sales in almost
100 countries worldwide. Tupperware's distribution system for its
storage business includes 1,800 distributors, 58,700
managers and 1.2 million dealers worldwide. In addition,
the company's beauty business commands a direct sales force over 1.1
For the fiscal year ending December 31, 2010, sales were approximately
Janice Hofferber, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's reviews Tupperware for possible upgrade to investment grade
250 Greenwich Street
New York, NY 10007
No Related Data.
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