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Rating Action:

Moody's upgrades Tupperware's CFR to Caa2; ratings on review for further upgrade

17 Nov 2020

New York, November 17, 2020 -- Moody's Investors Service, ("Moody's") today upgraded Tupperware Brands Corporation's ("Tupperware") Corporate Family Rating (CFR) to Caa2 from Caa3, its Probability of Default Rating to Caa2-PD from Caa3-PD and its senior unsecured notes rating to Caa3 from Ca. The Speculative Grade Liquidity Rating remains unchanged SGL-4. The CFR, PDR and notes ratings were placed on review for further upgrade.

The upgrade to a Caa2 CFR reflects Tupperware's improved operating performance and increased likelihood that the company will refinance the 2021 note maturity. On November 2nd, Tupperware's announcement that it had entered into a commitment letter with Angelo, Gordon & Co. and JP Morgan Chase Bank, in which they have agreed to provide Tupperware with $275 million in term loans.[1] The term loans will be comprised of a $200 million term loan A and a $75 million term loan B, both of which will be due in 2023. Net proceeds of the new debt and cash on hand will be used to redeem the company's remaining $380 million of senior notes due in June 2021 and pay fees and expenses. If completed based on the terms outlined, the transaction will significantly reduce the company's liquidity risk and will allow management to concentrate on execution of Tupperware's meaningful turnaround in the current recessionary environment. Tupperware ended a string of declining results and produced growth in the active sales force and revenue in the third quarter as part of its turnaround efforts, and the performance contributed to improved capital terms that is increasing the likelihood of a refinancing at a manageable interest cost.

Moody's recognizes the challenges that Tupperware will face given continued governmental mandates for social distancing that directly contrasts with the company's traditional party-based direct selling business. Tupperware's sales force is utilizing a number of online and social media tools developed by the company, as a partial offset to these challenges. The third quarter performance evidences some initial success with these strategies. Social elements including changes to consumer shopping patterns and the attractiveness of individuals serving as Tupperware sales representatives are also negatively affecting the company's direct selling business model. Nonetheless, recent senior management appointments bring important direct selling and consumer product experience.

Tupperware's ratings remain on review for upgrade pending completion of the proposed refinancing. The review will focus on Tupperware's ability to complete the proposed transaction and the final terms. Upon completion of the deal, Moody's expects to upgrade Tupperware's CFR to Caa1.

The following is a summary of Moody's rating actions:

Tupperware Brands Corporation

Ratings Upgraded:

Corporate Family Rating to Caa2 from Caa3; placed on review for further upgrade

Probability of Default Rating to Caa2-PD from Caa3-PD; placed on review for further upgrade

Senior unsecured rating to Caa3 (LGD5) from Ca (LGD5); placed on review for further upgrade

Outlook:

....Outlook, Changed To Rating Under Review From Negative

RATINGS RATIONALE

Tupperware's Caa2 CFR reflects the challenges related to its core business, including returning its direct selling business to long term revenue growth. Moody's believes that competitive, economic, and structural headwinds will continue to create challenges for the company to maintain sustainable top line growth and quickly execute a significant operational turnaround. The company's unique direct selling business model is highly reliant upon its ability to recruit and retain sales representatives around the world. There is risk to direct sellers in developing markets as increasing retail penetration, e-commerce activity, and competition gradually diminish the current distribution advantages. Developing markets also tend to include more volatile economies and foreign exchange rate exposure. In addition, the company's modest scale relative to other consumer product peers and sensitivity to discretionary consumer spending heighten credit risks. The ratings are supported by Tupperware's well-recognized brand name, good product development capabilities, and global selling and distribution capabilities.

The speculative-grade liquidity rating is unchanged at SGL-4 indicating weak liquidity due to Tupperware's reliance on external capital to address the June 2021 maturity. Moody's expects to upgrade the liquidity rating once the refinancing is completed.

Social risks are a meaningful consideration given the company's direct sales business model. The current potential impact of the coronavirus on the sales force and mandates for social distancing, changing demographics, economic and employment conditions can affect the company's ability to recruit and retain its sales force and can also influence how consumers shop. The business model can also come under scrutiny by regulators. Tupperware also faces important corporate governance challenges reflecting meaningful turnover at the senior management ranks, although Moody's views as positive the focus of new senior management on consumer needs to create long-term sustainable value and turn around the business. Environmental considerations are not material to Tupperware's credit profile, but the company must monitor its land, water, energy and raw material usage.

The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of consumer sectors from the current weak U.S. economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Tupperware's ratings could be downgraded if the company is unable to successfully complete the refinancing of its notes due June 2021. Ratings could also be downgraded if the company is unable to maintain the initial improvement in its sales representative counts, revenue and earnings. Deteriorating liquidity or an adverse shift in the regulatory environment could also lead to a downgrade.

Tupperware's ratings could be upgraded if the company successfully completes the refinancing of its notes due June 2021.

Tupperware Brands Corporation is a global manufacturer and direct seller of consumer products across multiple categories including food storage, preparation and serving items, and beauty and personal care products. Products are sold through a worldwide sales force that includes approximately 3 million independent dealers. Tupperware is publicly traded and generated approximately $1.7 billion in annual revenue.

The principal methodology used in these ratings was Consumer Packaged Goods Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1202237. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

REFERENCES/CITATIONS

[1] Form 8-K (SEC) 02-Nov-2020

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Chedly Louis
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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