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* You may have seen the news stories about Downers Grove-based Instant Pot’s bankruptcy…
* The Atlantic | The Instant Pot Failed Because It Was a Good Product: A one-hit wonder is never enough.
* AP | Instant Pot maker seeks bankruptcy protection as sales go cold: The maker of Pyrex glassware and Instant Pot has filed for Chapter 11 bankruptcy protection as the company that was already struggling is stung by inflation, with Americans pulling back on spending. According to a filing with the U.S. Bankruptcy Court for the Southern District of Texas this week, Instant Brands, based outside of Chicago, has more than $500 million in both assets and liabilities.
* USA Today | Instant Pot & Pyrex parent company files for bankruptcy after year of cold sales: The filing with the U.S. Bankruptcy Court for the Southern District of Texas highlights the impact of inflation as Americans reduced spending on its products including Pyrex glassware. The Illinois-based company listed over $500 million in both assets and liabilities.
* Steve Daniels at Crain’s…
The story the company’s chief restructuring officer told in court filings was one pinning the blame on forces outside the company’s control.
There was no mention made of how the $391 million in debt, which Instant Brands owes to non-bank firms whose interest rates tend to be considerably higher than commercial banks, played a role in the company’s current plight.
That tale is familiar. Instant Brands is majority owned by Cornell Capital, a New York-based private-equity firm that engineered the 2019 merger after initially purchasing locally based World Kitchen, the Pyrex and CorningWare company, in 2017. […]
In April 2021, in the midst of that sunny period [of high sales during the pandemic], Instant Brands took on a $450 million term loan, according to the filing. That debt refinanced $294 million in existing debt, including $100 million tied to the 2019 acquisition, and helped support a $245 million dividend to the shareholders, according to a Moody’s rating of the loan in May 2021.
Essentially none of the debt, then, supported investment in the business.
And that unnecessary debt, along with the cash pulled out of the company to pay a dividend to its holding company owners, created an unsustainable situation when demand dropped.
posted by Rich Miller
Thursday, Jun 15, 23 @ 12:39 pm
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Comment by 100 miles west Thursday, Jun 15, 23 @ 12:45 pm
“Shareholder value” is a cancer on capitalism. This was vultures deliberately wrecking a company for a fast buck.
Comment by Give Us Barabbas Thursday, Jun 15, 23 @ 12:50 pm
If you are a company or lender who gives credit to private equity firms, you have to know that there is a good chance that they are going to go bankrupt and leave you holding the bag. It is hard to feel sorry for most of them because they knew what they were getting into.
The average employees are a different matter. They often are the most impacted by the bankruptcy and the least responsible for it. We need better safeguards for them in these types of situations.
Comment by NickNombre Thursday, Jun 15, 23 @ 12:54 pm
They also went out of their way to make pyrex a worse product, then played a very silly game with trademark rights to lie about it. For the record, “pyrex” is regular glass, while “PYREX” is the good stuff that doesn’t shatter.
Cornell took a profitable business with a well-made, popular product and crashed the whole thing for a quick cash infusion. It’s sad and distressing that doing something well for a reasonable profit is no longer capital’s preferred business model. Now they’d rather just plunder those businesses.
Comment by vern Thursday, Jun 15, 23 @ 12:54 pm
Vulture capital gonna vulture capital every single time. Don’t build a sustainable company, just acquire one for free with magical debt restructuring, make promises of infinite growth while actively undermining your business model, and when you can make a clean exit, pull a card out from the bottom and walk away. Then go on CNBC for a segment so you can blame inflation, restrictive government policy, and how nobody wants to work anymore.
Comment by Roadrager Thursday, Jun 15, 23 @ 12:58 pm
Sounds like a Soprano’s “bust out”.
Comment by Papa2008 Thursday, Jun 15, 23 @ 1:11 pm
Over $200 million of that debt was paid out in the form of dividends to shareholders.
Comment by Former Downstater Thursday, Jun 15, 23 @ 1:12 pm
Yuck. Everything these hedge fund guys do turns to yuck, except for the shareholders. Real,people dedicate their lives to these companies and become pawns in this game. Yuck.
Comment by Stormsw7706 Thursday, Jun 15, 23 @ 1:19 pm
Private equity did the same thing here to what they did to retail. In cases like Toys R us they left lots of debt that was cash to the private equity firms…basically cashing out for the equity firm and destroying the underlying companies.
Comment by DTown Resident Thursday, Jun 15, 23 @ 1:34 pm
Hedge funds and the like are leeches, they add nothing and take everything. They literally make the world a worse place by existing.
Comment by Perrid Thursday, Jun 15, 23 @ 1:34 pm
Just another example of how exotic financing and one bad year can lead a decent company (or at least a company with some decent products) to bankruptcy.
Comment by Three Dimensional Checkers Thursday, Jun 15, 23 @ 1:36 pm
The only thing missing is lighting a match.
Comment by Excitable Boy Thursday, Jun 15, 23 @ 1:39 pm
–how exotic financing–
Except the whole point was to siphon all the value from the company, to the few holders.
This wasn’t an ‘oops, we made a mistake’.
It’s ‘great, that worked out well. Now on to the next one.’
Comment by TheInvisibleMan Thursday, Jun 15, 23 @ 1:45 pm
Talk about a great name for a cannabis delivery service…
Comment by A Well-Regulated Commenter Thursday, Jun 15, 23 @ 1:47 pm
Bustout 101…by the book.
Comment by Dotnonymous x Thursday, Jun 15, 23 @ 1:58 pm
It’s a little like a municipality leasing its parking meters for 75 years and spending all the upfront payment for said lease in the first year.
Comment by SAP Thursday, Jun 15, 23 @ 2:01 pm
I love my instant pot! I have several stove top pressure cookers, but when I just want something without a lot of work, because with stove tops once must frequently adjust the heat so one is at first building and then maintaining the pressure, the Instant pot is amazing.
The only problem is while I have toyed with the idea of buying the 15 lb pressure model, I haven’t found a compelling enough reason to buy another one. I have one at my home and one at my vac home. It seems wasteful to buy another while those two still function.
Comment by cermak_rd Thursday, Jun 15, 23 @ 2:02 pm
Private equity (actually, the leveraged-buyout flavor) strikes again. Just wait until infrastructure (and its cash flows) go up for sale by local and State government agencies, pursuant to HB 2878 and HJR 23, which passed the General Assembly last month. The Chicago parking meter fiasco will likely be repeated.
Comment by Ares Thursday, Jun 15, 23 @ 2:02 pm
Our terminology has changed over the years from “leveraged buy out” to “venture capital” and “private equity.” But make no mistake the game is exactly the same as it was in the 80’s. Put a bunch of debt on the business, pull out the assets for the investors, and leave some else to hold the bag when you can’t service that debt. And with current interest rates, much like the 80’s, you’re going to see more of this. I have no sympathy for the owners or their lenders but feel for the employees. And sadly the former will go on to do this all over again while the latter try to piece their lives back together.
Comment by Pundent Thursday, Jun 15, 23 @ 2:05 pm
“private-equity firm”
That’s what I was waiting for.
Our entire economy has become self-destructive.
Comment by NIU Grad Thursday, Jun 15, 23 @ 2:14 pm
Sounds a lot like Gannett, or, as I call it, The Company that is Really GateHouse.
Comment by Chris Wetterich Thursday, Jun 15, 23 @ 2:17 pm
Go to any antique store/flea market. The old PYREX dishes are getting top dollar. Especially those with those funky ’70s colors.
May make them even more valuable now.
Comment by Flyin'Elvis'-Utah Chapter Thursday, Jun 15, 23 @ 2:18 pm
Bankruptcy courts enabling these leveraged payouts, is the ultimate investors’ welfare.
Comment by walker Thursday, Jun 15, 23 @ 2:20 pm
Sounds like something one of our former governors would be involved with.
Comment by Been There Thursday, Jun 15, 23 @ 2:20 pm
==one bad year==
lol No self-respecting reporter should publish that excuse without calling it out. More than half of the loan was paid to shareholders as a dividend.
Taking out a load to pay a dividend should be illegal. At a minimum, there should be a clawback as part of the bankruptcy; it would be interesting to know what the corporation said the loan was going to be used for.
Comment by Pot calling kettle Thursday, Jun 15, 23 @ 2:21 pm
There are two recent books to also look at, detailing some of the larger failures of leveraged investing in recent years:
“These Are The Plunderers: How Private Equity Runs – and Wrecks – America” by Gretchen Morgensen
“Plunder: Private Equity’s Plan to Pillage America” by Brendan Ballou
Comment by Ares Thursday, Jun 15, 23 @ 3:02 pm
‘Greed, for lack of a better word, is good.’ — Gordon Gekko.
Comment by DEE Thursday, Jun 15, 23 @ 3:05 pm
Two things about this strike me. The first is something we’ve always known: Private Equity borrowing money to buy a company and transferring debt onto the company books. This amount (maybe 50% limit) should be regulated at the very least.
The thing that surprised me here is that they borrowed additional money on company books to pay out to investors. How is this allowed?
Comment by Victor Thursday, Jun 15, 23 @ 3:14 pm
>>>>Go to any antique store/flea market.
You can take my CorningWare when you can pry it from my cold, dead hands. I love my relics of Cold War technology. And the most expensive piece I have is actually the Pyrex lid for the 4″ pan.
Comment by We've never had one before Thursday, Jun 15, 23 @ 3:52 pm
Jack Welch once again strikes from beyond the grave
Comment by Anonish Thursday, Jun 15, 23 @ 3:53 pm