The parent company behind kitchen stapes, such as Pyrex, CorningWare, and Instant Pot, has filed bankruptcy proceedings in Canada and the US. Instant Brands has stated that rising interest rates and unpredictable, post-pandemic supply chain issues have left the company unable to manage its debt. While Instant Brands took measures to keep the company afloat, the influx of debt on their books became too much to handle, leaving Instant Brands no other option than filing a Chapter 11 bankruptcy.
According to the court filings, Instant Brands claims that in the first three months of 2023, they generated a meager $17.9 million operating cash flow, starkly contrasting the over $500 million UDS they have on their books in debt. The rising interest rates in recent months made their debt too impossible to manage, and on Monday, the company filed for Chapter 11.
In a recent press release, Instant Brands CEO Ben Gadbois stated, “Tightening of credit terms and higher interest rates impacted our liquidity levels and made our capital structure unsustainable.” He went on to say, “We have been working closely with all of our financial stakeholders to position the company for its next phase of success,” adding that Instant Brands has plans to continue operating as it restructures and seeks approval for a plan to repay creditors.
Road to Ruin
Despite their current situation, Instant Brands is a company that experienced massive growth very quickly thanks largely in part to one product: The Instant Pot.
The Instant Pot is the brainchild of Robert Wang of Ottawa, a former Nortel engineer. Introduced in 2009, Instant Pot experienced quick growth and was selling hundreds of millions of devices each year leading up to the pandemic.
In 2019, Wang merged his company with Corelle Brands. A company out of Illinois that owned such brands as Pyrex, CorningWare, Chicago Cutlery, Visions, and of course, Corelle. This merger allowed the Instant Line to expand beyond cookware and into devices like air purifiers and coffee makers, and Instant Brands was formed.
Instant Brands experienced another significant boost in sales at the beginning of the pandemic. However, this sudden boost would also be the beginning of their downfall. As demand for the Instant Pot grew during the pandemic, so did the cost of goods and wait times for the product. Conditions grew even more difficult for the company with the closure of several critical Asian shipping ports in 2021.
At this point, sales and profits started to drop, forcing Instant Brands to complete a debt deal in an attempt to raise funds to buy the company some time. However, that increased the debt on their books, and without the cash flow to manage the debt, they were forced into Chapter 11 proceedings anyway.
Eric Snyder, head of the bankruptcy department at New York-based law firm Wilk Auslander, said in an interview, “For a company like this to have $500 million in debt is excessive, and they can’t support it.” He says that while the debt might have been manageable while interest rates were low, recent lending-rate increases have made it impossible to overcome. “At eight or nine or 10 percent, that’s $50 million a year just to service the debt — it’s impossible to do.”
What’s Next for Instant Brands
Instant Brand has managed to secure over $133 million in funds to cover certain obligations such as employee salaries, benefits, pensions, supplier payments, and other expenses while it restructures and looks to gain approval on a plan that will allow them to continue to operate. However, experts are doubtful they will be able to come out the other side unscathed, as their press release suggests.
Snyder believes that while this has bought them some time, “it’s really up to the creditor at this point because of the size of the debt, whether they are going to let them continue to fund losses.” He further states that he wouldn’t be surprised if the company is forced to liquidate.
During the peak of its popularity in 2021, Instant Brands borrowed $450 million worth of bonds to help grow its business and expand its product line. Even though the bonds aren’t due until 2028, those bonds were trading at 22 cents on the dollar a day after Instant Brands made their press release. A good indication that investors aren’t confident they will get their money back.
“They took on too much debt, and now you have a company that was moderately profitable now underwater because of the debt load,” Snyder said. “That’s a tale as old as time.”
Despite their circumstances in Canada and the US, Instant Brands also has operations in England, South Korea, Singapore, China, Taian, and Australia which are not included as part of the bankruptcy proceedings meaning that the company may continue to have success in those parts of the world, just likely not North America.
This article was produced and syndicated by Wealth of Geeks.
Corrie is the founder of Corrie Cooks, where he shares 1000+ Instant Pot recipes, air fryer recipes and cooking guides. He is obsessed with all things food, and has never gone a day without cooking something in the Instant Pot.