Updated: Jun 1, 2021
By Olivia Pulsinelli – Assistant managing editor, Houston Business Journal 3 hours ago Tailored Brands Inc. (NYSE: TLRD), the parent company of Men's Wearhouse, Jos. A. Bank and similar brands, and 17 affiliated debtors filed for Chapter 11 bankruptcy protection in Houston on Aug. 2, a move that's been expected for months.
The main Chapter 11 petition listed total assets of more than $2.48 billion and total debts of nearly $2.84 billion as of July 4. As of Aug. 2, the company had $1.4 billion of outstanding funded debt obligations, according to a declaration filed by Holly Etlin, a managing director of AlixPartners LLP who was appointed chief structuring officer of Tailored Brands in July.
Tailored Brands, which is based in Houston but also has a main executive office in Fremont, California, entered into a restructuring support agreement with more than 75% of its senior lenders, according to a press release. The company filed the Chapter 11 petitions to implement the terms of the agreement, which includes a restructuring plan that is expected to reduce the company's funded debt by at least $630 million.
The company plans to use cash flow from ongoing operations, $500 million in debtor-in-possession financing from its existing revolving credit facility lenders, and cash on hand — including approximately $90 million of restricted cash that certain lenders have agreed to unrestrict — to continue operating during the bankruptcy process.
Companywide, Tailored Brands currently operates 1,274 stores in the U.S. and 125 in Canada. According to Etlin's declaration, the company previously sold its U.K. corporate apparel operations and closed 17 locations in its fiscal year 2019, which ended Feb. 1, 2020. Since then, the company has closed approximately 50 stores.
The company also has been negotiating rent deferrals with approximately 900 landlords, of which approximately 470 have agreed to deferrals. The deferrals were focused on rent for April and May, when stores were closed because of Covid-19. At the time, the company furloughed all U.S. store employees as well as a "significant portion" of employees in the company's distribution and network offices. As of Aug. 2, the company has reopened substantially all of its stores and is recalling furloughed employees as circumstances permit, Etlin's declaration stated.
RECOMMENDED RETAILING Men’s Wearhouse owner files for bankruptcy RETAILING Lord & Taylor, nation's oldest department chain, files for bankruptcy RETAILING Neiman Marcus to close in Bellevue by fall as the company moves through bankruptcy proceedings Shutdowns and stay-home orders in response to the Covid-19 pandemic have hurt brick-and-mortar retailers significantly, but Tailored Brands faces additional challenges. The company's stores specialize in suits and other apparel items that have seen demand plummet while offices are shut down. Tailored Brands has also struggled with profitability in recent years. In fiscal year 2019, Tailored Brands saw profits drop 74% and net sales fall 3.5%. The company also suspended its dividend last fall and reorganized some of its executive positions in December.
Anthony Campagna, global director of fundamental research at analytics firm ISS EVA, told the New York Times that Tailored Brands will have to reinvent its business model, including significantly improving its online presence, in order to sustain its business moving forward. “There is a place in the market you can sell lower-tier men’s clothing,” Campagna told the Times. “It’s just a matter of positioning it correctly.”
But Tailored Brands said it had been making progress in improving its results before Covid-19. “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,” Tailored Brands President and CEO Dinesh Lathi said in the release. “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.” Numerous other large retailers have filed for bankruptcy in recent months due to business circumstances caused by the Covid-19 pandemic, including Neiman Marcus, J.C. Penny, J. Crew and Brooks Brothers. Just hours before Tailored Brands' filing, Lord & Taylor's owner, Le Tote Inc., filed in Richmond, Virginia.
Tailored Brands' advisers in the restructuring and Chapter 11 process are Kirkland & Ellis LLP as legal adviser, PJT Partners as financial adviser and AlixPartners as restructuring adviser.