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Tupperware Brands: The Bonds Have (Potentially A Lot) Further To Fall

Mar. 03, 2020 4:01 AM ETTupperware Brands Corporation (TUP)6 Comments
Jeremy Raper profile picture
Jeremy Raper


  • I include interest coverage as I think it's important to think about buffer for the existing capital structure for a business like this.
  • If it's reasonable that in an equitization the bonds have 30-50pts of downside whilst only 10pts of upside if they get refinanced, it seems to imply around a 25% chance of default.
  • Next catalysts would be a downgrade to full junk at all agencies; then the likely tricky 4Q earnings call and (what I think will be) an abysmal 1Q earnings report in May.

Originally published February 25, 2020

I posted a tweet thread a week or so ago on Tupperware Brands (NYSE:TUP) - you can see the thread here, but the thesis was essentially that the short-dated Jun'21 TUP bonds ($600mm outstanding), then at 99.5c, didn't anywhere discount the possibility of a needed restructuring of the company, given the leverage picture; the deterioration in the business in China and Brazil; the structure of the debt burden; and imminent covenant breach.

TUP's preliminary earnings released today were a bit of a disaster - the stock fell 50% - and the bonds are now down 10pts or so to around 90c. I was short a bit of stock and a lot of bonds, so while this is a good outcome, I am still a little perplexed why the bonds are hanging in so well. Here's the capital structure as it stands today, and then what it will look like at year-end FY20E (note, this is using gross leverage, not net, since although TUP has >$100mm cash on balance sheet this is all tied up overseas and basically impossible to repatriate, so gross leverage is the appropriate way to look at the business):

A few things worth mentioning off the bat:

  • I treat the secured bonds - the issue maturing Jun'21 - as a par bond, even though the price today is 90c. This is because the issue is so short-dated, it doesn't really make sense to consider a discounted market-implied debt value for such a near-term obligation;
  • I include interest coverage - even though this is not in any company covenants - as I think it's important to think about buffer for the existing capital structure for a business like this (and it is something the revolver lenders will consider when thinking about what total sustainable leverage is for the

This article was written by

Jeremy Raper profile picture
Full-time investor. Going forward all my write-ups/content will be exclusively at rapercapital.com.You can read about my approach here:https://rapercapital.com/investment-philosophy/You can see my past performance here:https://rapercapital.com/historical-idea-performance/You can contact me at rapercapital@gmail.com or follow me on Twitter @puppyeh1

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Comments (6)

Capt Stu profile picture
the bonds are showing a full depth of book. lots of buyers. unlike ford bonds, no buyers in the book.
So low now I can't get out
Need an hope and a prayer.
schizoidmantoo profile picture
Unfortunately, I too am long Tup bonds. Mine are due 6/2021. You mention equitization. I am not sure how that works for a bond. Is that a form of default where they offer you stock rather than a cash amount less than par?
Chatos profile picture
by the way, the bond is currently trading at 83.7 - sadly
Chatos profile picture
many thanks - I am unfortunately long the bond - how do you short a bond ?? will follow you from now on - thanks
Jeremy Raper profile picture
this was published originally on my site over a week ago - pls follow there for most up to date notes. you short a bond just like a stock (borrow it and then sell it).

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