Less than three months after exiting Chapter 11, Tailored Brands is back in the market seeking additional financing.
The retailer, which owns Men’s Wearhouse, Jos. A Bank and Moores in Canada, emerged from bankruptcy as a private company in early December, but is now seeking some $75 million in order to continue operating, according to papers filed in the Southern District of Texas last week.
The trust that is still working its way through bankruptcy court owns a portion of the company’s equity.
According to a notice of an emergency bankruptcy court hearing, Tailored Brands Inc. “experienced unanticipated declines in its business” in December 2020 and early 2021, which caused the company to “severely underperform against the financial projections upon which its Chapter 11 plan of reorganization was based.”
As a result, the company has determined it needs to obtain $75 million in additional financing by the beginning of March, the papers said. In consultation with its advisers, PJT Advisors and AlixPartners, it was determined that Silver Point Capital LP, one of its existing lenders and its largest equity holder, will provide $25 million to the exiting priority term loan and $50 million secured on a subordinated basis, the papers said. That loan would be converted to equity within three years at $1 a share.
The loan is expected to be closed sometime this week, according to published reports, subject to bankruptcy court approval.
The trustee in the bankruptcy case, after analyzing the company’s performance since emerging from Chapter 11 in December, “believes the company is in need of additional financing in order to survive the pandemic. The trustee believes that certain losses experienced in recent months may be permanent and do not just reflect a temporary shift in demand.” And without the additional loan, it would “likely result in another restructuring process, putting the company at risk of potential liquidation.”
Even so, there was pushback to the proposed loan. In a letter to the court, creditor Yosef Magid requested the court deny the motion and “force the debtors back into Chapter 11” since the deal would “materially change the terms of the confirmation plan,” essentially represents a sale of 73 percent of the company to “an insider,” and there are no competing offers to Silver Point.
Tailored Brands is not the only retailer to have been pushed into bankruptcy as a result of the pandemic. J.C. Penney Co. Inc., Neiman Marcus Inc. and others also filed Chapter 11 last year. But because of Tailored Brands’ focus on tailored clothing, it has been particularly hard-hit as its physical stores were closed due to lockdowns, men eschewed suits for work-from-home casualwear, and wedding, proms and other events were all canceled.
During its bankruptcy, the company eliminated $686 million of debt from its balance sheet, closed some 500 stores and negotiated a $430 million asset-based loan facility, a $365 million exit-term loan and $75 million of cash from a new debt facility.
Tailored Brands did not immediately respond to requests for comment.