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Cat Corey

Ayden Crosby

Tupperware Brands’s first day hearing held 19 September turned contentious, despite pushing hearings on its more substantive, and, according to the company’s ad hoc group, objectionable, motions until next week.

Tupperware and the ad hoc group each provided their view of the Chapter 11 case and its likely outcome to Judge Brendan Shannon of the Delaware bankruptcy court. The debtors presented the case in a more hopeful light, as a quest to find the right buyer for the company. The ad hoc group, on the other hand, did not mince words, characterizing the case as a two-party dispute between debtors and their under-secured lenders that does not belong in Chapter 11 at all.

It wasn't just the debtors and ad hoc group sparring over the bankruptcy filing's propriety — Wexford Capital, a debtholder that was excluded from the ad hoc group and from participation in the prepetition bridge loan, also joined in support of Tupperware's filing. Wexford took umbrage with the ad hoc group’s presentation at the first day hearing, complaining about the treatment it received prepetition by the ad hoc group, and the prepetition exclusivity agreement between the ad hoc group and the debtors that prohibited the debtors from discussing restructuring options with Wexford. Wexford also addressed its prepetition lawsuit against two members of the ad hoc group accusing them of violating the terms of the credit facility when they removed $10m from collateral to support the bridge financing.

Leading up to the hearing, the ad hoc group filed both an objection to the use of cash collateral, as well as a motion to either dismiss or convert the case or lift the automatic stay so that the prepetition secured creditors can foreclose on Tupperware’s assets.

The ad hoc group’s motion to dismiss and objection to use of cash collateral make similar arguments, in sum that Tupperware simply does not belong in a Chapter 11 case. At the hearing, and in its papers, the group alleges that the minute the company entered Chapter 11 it was administratively insolvent, and will be completely unable to pay administrative expenses incurred during the Chapter 11 case. In addition, the ad hoc group argues that if Tupperware is allowed to continue the Chapter 11 case, the debtors are likely to run out of cash anyway, and will be forced to convert to Chapter 7.

The group argues that the company will not be able to obtain a DIP facility because Tupperware has no unencumbered assets by which to obtain such financing, and the group will not consent to a priming DIP. It also argues that the debtors cannot provide adequate protection to the lenders, as the company is already experiencing negative cash flow from operations. In fact, the group said that the sale process proposed by the debtors, under which the debtors are seeking to prohibit credit bidding, is “gambling with the lenders’ collateral.”

Also addressed in the ad hoc group papers and at the first-day hearing, is the proposed partial strict foreclosure of Tupperware’s assets, a process the debtors and their counsel staunchly oppose.

“The transfer of such an iconic asset should happen in broad daylight,” said Spencer Winters of Kirkland & Ellis.

Finally, the ad hoc group argues that the issues with Tupperware are a simple two-party dispute — one between the debtors and the ad hoc group. In addition, the group argued that Tupperware itself is not a large bankruptcy, with the actual revenue numbers associated with the entities in bankruptcy being relatively small.

“The only thing that’s large about the debtors is that they have so much funded debt,” said Allan Brilliant of Dechert, counsel for the ad hoc group.

The parties will return next week on 25 September at 10:30am for an evidentiary hearing on the remaining first day motions, while a second day hearing, at which the bidding procedures and the ad hoc group’s dismissal motion is currently scheduled for 9:30am on 11 October.

The ad hoc group holds in the aggregate approximately $462.65m, or 57% of the approximately $817m principal outstanding under the revolving/term loan credit agreement.

Tupperware fails to contain fireworks at first day hearing

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