Men’s Wearhouse owner searches for a new lifeline after bankruptcy exit

Tailored Brands Inc., the owner of Men’s Wearhouse, is looking for financial help to keep it afloat in less than three months since it emerged from bankruptcy protection.

According to court papers, Tailored Brands “severely underperformed” compared to Chapter 11 reorganization plans projections. As a result, it will need approximately $75 million to avoid default by March 1, according to court papers.

According to Mohsin Meghji, M-III Partners, the company reached a tentative agreement with Silver Point Capital (its largest equity holder and lender) to provide the funds and help avoid bankruptcy.

Documents show that plans call for $25,000,000 of funds, which rank the same as an existing term loan and $50,000,000 of subordinated debt. The equity loan of $50 million would be converted into equity in three years, at $1 per share.

In a statement to Bloomberg, a representative of Tailored Brands stated that the company had been in discussions to raise additional capital to support its strategic plan. The company expects to close this deal next week. According to the statement, the retailer “has exceeded forecasts shared with potential investors in every week over the past two-and a half months.”

Silver Point representatives declined to comment. M-III representatives didn’t respond immediately to inquiries for comment.

After the pandemic that decimated demand for men’s dresses, Tailored Brands declared bankruptcy. After having repaid $700 million in debt, it emerged in December. Silver Point was made the largest equity holder of the company, while low-ranking creditors such as landlords and vendors were given a portion of the common stock.

The new financing could affect these creditors because part of the funds will be converted into equity. This would dilute the creditors’ stake. The position could be reduced from 6.7 percent down to less than 1%, according to PJT Partners Inc.’s analysis. In addition, the note states that the shares would be worthless if Tailored files bankruptcy again.

Meghji, who helps low-ranking creditors keep their value, recommends that they cash out their shares for $3.3million in exchange for dropping any potential lawsuit against Silver Point. The bankruptcy court must approve the deal.

Tailored Brands is “still worse off than most” distressed retailers. In an interview, it has been experiencing “a double whammy” with reduced foot traffic and declining demand for formal and business attire, Patrick Collins from law firm Farrell Fritz stated. He represented landlords in the company’s bankruptcy and stated that their equity stake in the reorganized business “could not be worthless.”

Many retailers have not been kind to the pandemic, particularly those that cater to office workers. Other struggling retailers like J.C. Penney Co. and J. Crew Group Inc., Neiman Marc Group Inc. to bankruptcy

Tailored Brands’ roots can be traced back to 1973 when George Zimmer founded Men’s Wearhouse in Houston. Before he was fired in 2013, he would become the face and face of the brand. He starred in TV commercials, expounding his catchphrase, “You’re gonna be like the way that you look — I promise it.” It bought Jos. A. The following year, bank.

 

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