Instant Pot Maker Tries Out Bankruptcy After Cooking Up New Debt

Welcome to Steven Church in Wilmington, where I’ve been covering the bankruptcy filing of Instant Brands. We also have stories on Blackstone giving up on a healthcare business, Pakistan, Egypt and Credit Suisse’s CDS. Follow this link to subscribe. Send us feedback and tips at [email protected] or Tweet/DM to @schurch33

Debt Indigestion

US bankruptcy courts have been filling up with companies that swallowed new debt from their creditors in order to survive, only to get indigestion. 

The latest example is Instant Brands, the Illinois-based maker of the Instant Pot and Pyrex kitchenware. Just five months ago, the company negotiated a complex debt maneuver that transferred some of its most valuable assets — manufacturing facilities in New York and Pennsylvania — into a new unit.

Instant Brands joins companies including Envision Healthcare Serta Simmons Beddingseeking court protection after lender lifelines weren’t enough.

According to bankruptcy court documents, however, the company ran into liquidity problems when vendors and suppliers tightened payment terms.  

Facing interest payments in June and term loan maturities in the second half of 2023, Instant Brands had been negotiating with lenders and its private equity owner Cornell Capital about its options, according to court . In recent weeks, its cash positions worsened, and it began to pursue bankruptcy financing instead of a short-term loan. 

The January deal provided Instant Brands with a temporary reprieve, but left it with $55 million in additional debt and forced it to give up valuable collateral rights. To get enough money to fund its reorganization case, the company said in court papers that it must repay the debt and retrieve the collateral using a proposed $132 million financing. A judge must approve the move now that Instant Brands is in bankruptcy.

At a court hearing scheduled for Tuesday, the company will ask to US Bankruptcy Judge David Jones for permission to keep paying its more important vendors. The move will help Instant Brands keep operating while it restructures.

The company estimated it has assets and liabilities of as much as $1 billion in its bankruptcy petition. In a statement Monday, managers stressed their intention to save the company, which owns some of the most iconic household brands in the US, including Pyrex, CorningWare and Chicago Cutlery. 

“After successfully navigating the Covid-19 pandemic and the global supply chain crisis, we continue to face additional global macroeconomic and geopolitical challenges that have affected our business,” Ben Gadbois, the company’s president and chief executive officer, said in a statement

For more on how botched liability management deals are complicating bankruptcies, listen to the latest Credit Edge podcast.

Notes From the Brink

Blackstone gave up on its five-year-old investment in one of the biggest US treatment centers for autistic children, putting the company into bankruptcy and agreeing to sell it back to founder Doreen Granpeesheh

Center for Autism and Related Disorders blamed its bankruptcy on labor shortages, inflation and the pandemic, which forced the temporary shutdown of in-person services at many of the 130 centers where patients receive one-on-one care. 

“Growing medical inflation, increasing wage pressures, and increasing shortages all contributed to the higher costs of doing business,” Steven Shenker, CARD’s chief restructuring officer, said in an affidavit filed Monday.

The company, which operates in 13 states, owes lenders $245 million, Shenker said. CARD employs about 2,500 people and serves more than 3,500 patients.

Blackstone affiliates and CARD’S lenders put $55 million into CARD in 2021 in a failed bid to help it recover from the pandemic. In the 12 months ending in April, CARD had a net loss of $82 million, according to court papers.

Affiliates of the private equity giant bought CARD in 2018 from Granpeesheh. Granpeesheh is now part of the group that has agreed to be the lead bidder at a court-supervised auction, according to court papers. Under an agreement signed before the bankruptcy began, if no one tops its $25 million offer, Pantogran will take ownership of CARD.

High Alert

• Shanghai Banxia, a top-performing Chinese macro hedge fund, has slashed its holdings in property stocks, just two months after predicting a major rebound in the sector. Its flagship Banxia Macro Fund slumped 9.8% in May, the biggest monthly loss since at least 2018, after it sold property-related shares and cut commodities positions.
• Main shareholders tentatively agreed to a lock-up period for their stake in Brazilian retailer Americanas, paving the way for a restructuring agreement with creditors. The precise lock-up period for the billionaires Jorge Paulo LemannMarcel TellesCarlos Sicupira is still under discussion and creditors are requiring it to last into 2027. The company said on Tuesday that former executives committed fraud on financial statements and acted to hide the company’s real situation from the board of directors and the market. 
• Austria is probing the transactions that led to the insolvency of the department stores, including a sale by billionaire Rene BenkoSigna Holding. The government’s legal office is reviewing whether developments in the past months hurt creditors including Austrian taxpayers. The company filed for insolvency last week after Benko sold it in May.

Emerging Troubles

s officials sent mixed messages over how the country will tackle its debt load. Karl Lester M. Yap and Faseeh Mangi write. Central bank Governor Jameel Ahmad said the country will pay $900 million of obligations in June, contradicting comments made by government officials over the weekend that Prime Minister Shehbaz Sharif’s administration was planning to engage in talks with creditors on its bilateral debt. The clock is ticking either way, because the country will need to revive its IMF program before the end of June, when it expires.

Separately, ’s Supply Minister Ali El-Mosilhy said on Monday that was providing the Arab world's most populous nation with a line of credit. A few hours later, he told Egyptian media a line of credit hadn't been opened, but that Egypt was in talks with India -- among other countries -- about facilities to boost trade, Abdel Latif Wahba and Tarek El-Tablawy report

If the countries agree to one, it'll be a welcomed break for Egypt, which is trying to turn around an economy that was heavily exposed to the shock waves of Russia’s invasion of Ukraine and is a major importer of commodities. Given that there are signs of progress in Egypt’s plan to sell state assets, and that tourism has rebounded, Citigroupsees authorities holding off a devaluation of the currency until at least September. Indian president Narendra Modi will likely visit Egypt later in June.

By the Numbers

As the sale of Credit Suisse completed on Monday, credit-default swaps of the two former rivals are now trading almost at the same level, Libby Cherry reports. Since the day the merger was announced, investors have been betting on a so-called succession event, meaning that UBS would become the reference entity for Credit Suisse's contracts. Traders did that by selling credit default swaps on Credit Suisse’s debt, earning relatively high premiums, while buying cheaper protection on UBS’s obligations. The trade may pay off soon: the Credit Derivatives Determinations Committee was asked to rule on the succession and and are meeting to discuss the matter on Thursday. 

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— With assistance by Faseeh Mangi, Abdel Latif Wahba, Karl Lester M Yap, Tarek El-Tablawy, Libby Cherry and Dana El Baltaji