National Post (National Edition)
Men's Wearhouse parent goes bankrupt, adding to retail wreck
Lagging suit sales take toll on Tailored Brands
Tailored Brands Inc., the owner of Men’s Wearhouse and Jos. A. Bank, filed for bankruptcy protection after the coronavirus lockdown kept America’s office workers at home, curtailing demand for new suits.
The filing in U.S. Bankruptcy Court in the Southern District of Texas makes the company the latest in a string of retailers that have grappled with competition from online shopping and have been among the hardest hit by COVID-19. Lockdowns have drained revenue, pushing already-struggling companies like J.C. Penney Co., J. Crew Group Inc., Neiman Marcus Group Inc. into bankruptcy. Lord & Taylor also filed Chapter 11 on Sunday.
Like many apparel chains, Tailored Brands was in a tough spot before the outbreak. Sales have fallen every year since 2016 as Men’s Wearhouse and Jos. A. Bank contended with changing consumer tastes and e-commerce rivals. The retailer was preparing a filing that would give it a chance to cut its borrowings and close unprofitable locations, Bloomberg reported last week.
“The unprecedented impact of COVID-19 requires us to further adapt and evolve,” Chief Executive Officer Dinesh Lathi said in a statement.
The company’s four retail brands, including Moores Clothing for Men and K&G Fashion Superstore, will continue to operate through the process. It employs 18,000 workers and operates 1,274 retail and apparel rental stores in the U.S. and 125 in Canada, according to court documents.
Tailored Brands filed Chapter 11 with a pre-negotiated plan of reorganization that is supported by more than 75 per cent of its senior lenders, the company said in the statement. The bankruptcy is expected to reduce the retailer’s funded debt by at least US$630 million and will be financed by existing debt holders, according to the statement.
The plan calls for a US$500 million bankruptcy loan backed by the company’s existing revolving credit facility lenders. Tailored Brands will ask the court’s permission to access the loan combined with cash on hand, including US$90 million of previously restricted cash made available to fund operations throughout the restructuring. The bankruptcy loan will then convert to a US$400 million revolving credit facility upon emergence from Chapter 11.
The company’s term loan holders will receive their portion of an exit term loan of between US$325 million to US$425 million and 100 per cent of the reorganized equity, according to court documents. Shareholders will be wiped out, with no recovery from the plan.
Tailored Brands is gradually returning to normal operations after the coronavirus temporarily shut its doors. It reopened just under half of its stores as of June 5, according to a statement. All of them, as well as e-commerce distribution centres in the U.S. and Canada, were temporarily closed in the first quarter.
To lead it through its restructuring, Tailored Brands is working with law firm Kirkland & Ellis LLP as legal advisor, investment bank PJT Partners as financial advisor and AlixPartners as restructuring advisor.