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
