Men’s Wearhouse owner Tailored Brands Inc. is seeking a lifeline to help it stay afloat less than three months after it emerged from bankruptcy protection.
Tailored Brands has “severely underperformed” compared to the projections in its Chapter 11 reorganization plan and needs roughly $75 million by the beginning of March to avoid a default, according to court papers.
The company has arranged a tentative deal with Silver Point Capital, its largest equity holder and a lender, to provide the funds and help it avoid another bankruptcy, according to a notice from Mohsin Meghji of M-III Partners.
Plans call for $25 million of funds that rank equal to an existing term loan and $50 million of subordinated debt, documents show. The $50 million loan would be converted to equity within three years at $1 per share.
A representative for Tailored Brands said in a statement to Bloomberg that the company has been in talks to raise additional money to help it execute its strategic plan and expects to close the deal next week. The retailer “has exceeded the forecasts shared with prospective investors in every week of the past two-and-a-half months,” according to the statement.
A representative for Silver Point declined to comment, while representatives for M-III didn’t immediately respond to requests for comment.
Tailored Brands filed for bankruptcy last year after the pandemic dented demand for men’s dress clothes. It emerged in December, having cut $700 million of debt. Silver Point became its largest equity holder as part of the deal, and low-ranking creditors like landlords and vendors received a chunk of the company’s common stock.
The new financing could hurt those creditors because part of the funds would be converted to equity, diluting the creditors’ stake. An analysis from advisers at PJT Partners Inc. suggested the position could be cut from 6.7 percent to less than 1 percent. But if Tailored were to file bankruptcy again, the shares would likely be completely worthless, according to the note.
To help low-ranking creditors preserve value, Meghji — who is in charge of helping that group get paid — is recommending they cash out the shares for $3.3 million in exchange for dropping a potential lawsuit against Silver Point. The deal is subject to bankruptcy court approval.
Tailored Brands is still “worse off than most” distressed retailers, experiencing “a double whammy” of both reduced foot traffic to stores and dwindling demand for business and formal attire, Patrick Collins of law firm Farrell Fritz said in an interview. He represents landlords in the company’s bankruptcy, and said their equity stake in the reorganized company “could be worthless.”
The pandemic hasn’t been kind to many retailers, especially those that cater to office workers. Lockdowns last year also pushed other struggling retailers including J.C. Penney Co., J. Crew Group Inc., Neiman Marcus Group Inc. into bankruptcy.
Tailored Brands traces its roots to 1973, when George Zimmer started Men’s Wearhouse in the Houston area. He would go on to become the face of the brand, starring in television commercials spouting his catchphrase, “You’re going to like the way you look -- I guarantee it,” before he was ousted in 2013. It acquired Jos. A. Bank the following year.
By Jeremy Hill and Katherine Doherty