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Tailored Brands Files Chapter 11, To Close Up To 500 StoresTailored Brands Files Chapter 11, Secures $500 Million in DIP Financing WWD Jean E. Palmieri August 3, 2020 After months of speculation and preparation, Tailored Brands has joined the retail parade in bankruptcy court. Late Sunday, the men’s wear retailer filed Chapter 11, the latest victim of the coronavirus. The company’s situation was exacerbated by its dependence on tailored clothing and the debt load it had accumulated by its $1.8 billion acquisition of Jos. A. Bank Clothiers in 2014. Under the terms of the deal, that was filed in the United States Bankruptcy Court for the Southern District of Texas, the retailer filed a pre-arranged financial restructuring plan that is expected to reduce its debt by at least $630 million. It has received commitments for $500 million in debtor-in-possession financing from its existing revolving credit facility lenders. Following court approval, this financing, combined with cash on hand — including approximately $90 million of restricted cash that the lenders have agreed to unrestrict and cash flow generated by ongoing operations — is expected to be sufficient to meet the company’s operational and restructuring needs. The restructuring agreement further expects the DIP financing will convert to a $400 million revolving credit facility from existing lenders upon the company’s emergence from Chapter 11. “As evidenced by the positive results we saw in January and February, we have made significant progress in refining our assortments, strengthening our omni-channel offering and evolving our marketing channel and creative mix. However, the unprecedented impact of COVID-19 requires us to further adapt and evolve,” said Tailored Brands president and chief executive officer Dinesh Lathi. “Reaching an agreement with our lenders represents a critical milestone toward our goal of becoming a stronger company that has the financial and operational flexibility to compete and win in the rapidly evolving retail environment.” The Chapter 11 filing did not come as a surprise — the handwriting has been on the wall for months for the parent company of Men’s Wearhouse, Bank, Moores and K&G. In late July, the company said in a filing: “We have determined that there is substantial doubt about our ability to continue as a going concern. Although we are evaluating several alternatives, it is likely that we will pursue a reorganization under applicable bankruptcy laws.” On July 1, the company missed a $6.1 million interest payment and said it did not have “sufficient liquidity to repay the amounts due under our indebtedness.” A missed interest payment is a sign of extreme stress that has become increasingly more common among U.S. retailers since the pandemic began. Both J.C. Penney Co. Inc. and Neiman Marcus Group skipped interest payments and used their grace periods to explore alternative paths forward, but ultimately filed for bankruptcy protection from creditors. As of the end of the first quarter on May 2, Tailored Brands had cash and cash equivalents of $244.2 million and its total debt stood at $1.4 billion. In the first quarter, total sales plummeted 60.4 percent to $286.7 million, and e-commerce sales were down 31.9 percent versus a year earlier. In mid-July, the company said it would close up to 500 of its 1,400 stores in the U.S. and Canada, and cut 20 percent of its workforce. That move was expected to result in a pre-tax charge of about $6 million in the second quarter of fiscal 2020 for severance payments and other termination costs, all of which are cash costs, it said. Like most other retailers, Tailored Brands has been hard hit by the pandemic, and as a merchant with a strong dependence on tailored clothing, it has also been impacted by the trend toward more casual attire by many men, especially in the past few months as most have been working from home. |
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