Tupperware Securities Rally In Spite of Going-Concern Warning

(Bloomberg) -- Tupperware Brands Corp. is weathering the global pandemic better than expected and working to address debt coming due next year, sending its shares and bonds higher in spite of a going-concern warning.

Covid-19 quarantines and shutdowns are at odds with a business known for the namesake parties where Tupperware products are sold, and sales have suffered. In the second quarter, they fell 16% from a year ago.

But the company cut costs and beat earnings expectations by a wide margin, resulting in the largest intraday climb ever for the stock and bonds that led the market in terms of price gains.

Shares briefly rose as much as 70% before retreating to trade up more than 63% to $15.71 as of 2:25 p.m. in New York. The company’s 4.75% bonds maturing in 2021 gained as much as 8.5 cents on the dollar to 90.5 cents, the highest price since February.

Debt Warning

The gains came even as Tupperware said that its roughly $500 million of debt due in June raised “substantial doubt” about its ability to continue as a going concern. Investors were nonetheless cheered by the Orlando, Florida-based company’s efforts to address the looming maturity.

“We are working with outside advisers to develop and evaluate options to satisfactorily address this indebtedness before its maturity next June,” Sandra Harris, the chief financial officer at Tupperware, said on an earnings call.

Harris said the company did cash tenders and open market purchases, while the company detailed in a regulatory filing that it tried to hammer out a debt swap with certain noteholders, but couldn’t reach an agreement. A tender offer this month garnered lackluster interest.

Still, for Hoai Ngo, senior credit analyst at Bloomberg Intelligence, the open-market purchases of bonds demonstrated management’s commitment to the business and could portend another exchange offer at a higher price.

“Investors are seeing the company as a going concern and not likely to file for bankruptcy in our view,” Ngo said in an email. “The second quarter numbers were decent, showing some signs of improvement in the U.S., but the big news was the company repurchasing bonds in the open market.”

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