In a court hearing in the Southern District of Texas on Friday afternoon, U.S. Bankruptcy Court Judge Marvin Isgur signed off on the company’s plan of reorganization, paving the way for the men’s wear retailer to emerge from Chapter 11 by the end of the month.
Tailored Brands Inc., parent company of Men’s Wearhouse, Jos. A. Bank and Moores men’s stores in the U.S. and Canada, filed for bankruptcy in August as a result of the coronavirus pandemic, its dependance on tailored clothing and a crushing debt load that it had accumulated in its $1.8 billion acquisition of Jos. A. Bank in 2014.
Under the terms of the deal, Tailored Brands’ reorganization will effectively hand over control of the business to its lenders. The plan allows the company to emerge from bankruptcy with substantial exit financing in the form of a $430 million asset-based lending facility, $365 million exit term loan and $75 million in cash from a new debt facility to support ongoing operations. The plan also eliminated $686 million in debt from the company’s balance sheet.
On Thursday, Isgur said the process to reach this resolution was a “hard-fought fight — and it should be. All things should be hard-fought.”
The big sticking point was objections raised by the creditors committee in the confirmation process, but the parties negotiated a resolution through mediation that took place this week before Judge David Jones of the same Texas bankruptcy court.
The creditors committee in the case had objected to the initial reorganization plan, arguing that it relies on an unduly low valuation of the company and undercuts recoveries for general unsecured creditors.
But the resolution reached on Friday gives the unsecured creditors 7.5 percent of the new equity in the company, five times what had been proposed in the initial plan, according to Jeffrey Pomerantz of Pachulski Stang Ziehl & Jones, who represented the unsecured creditors.
In addition, the enterprise value of the company was also a point of contention. The Tailored Brands’ debtors had suggested a value of $850 million, while the creditors committee’s own valuation expert had projected that the company’s total enterprise valuation after its bankruptcy would be roughly $1.5 billion, according to an objection filed earlier this month by the creditors committee.
“We are extremely pleased to have reached this milestone,” said Dinesh Lathi, president and chief executive officer. “Over the past three months, we have not only continued to advance steadily through this financial restructuring but also implemented new buy online, pick up in store and contactless payment technology to better serve our customers during the pandemic; further curated our assortments to make them more shoppable and relevant; opened our first next generation store in Shenandoah, Tex.; developed new partnerships; and continued to advance important diversity, equity and inclusion initiatives, consistent with our corporate values. These and other actions taken while in Chapter 11 are the continuation of a strategic transformation that started well before COVID-19 and will position us to compete and succeed for the long term.”
He went on to thank the “employees, customers, vendors, landlords and lenders for the ongoing support they have shown us. We look forward to entering the peak holiday season with this process behind us and to being positioned to grow our business by providing customers with selection, convenience, service and value across all our brands.”
Although the company will be owned by its lenders, its management team is remaining in place including Lathi and Carrie Ask, chief customer officer. They have been working to decrease the company’s tailored clothing-heavy assortment and home in on more casual offerings.
Earlier this week, the company inked a deal with former football player and media star Michael Strahan to sell his Collection by Michael Strahan line of suits and jeans in its Men’s Wearhouse stores and online. The tagline for the collection is “work leisure,” and the goal is to expand the offering into more casual options.
The company’s stock, which was delisted from the New York Stock Exchange and now trades over-the-counter, closed at 6 cents on Friday, down 8.8 percent.