By Aisha Al-Muslim
Tailored Brands Inc., the parent company of Men's Wearhouse and Jos. A. Bank, has filed for bankruptcy after the coronavirus pandemic slashed demand for dress clothes.
The publicly traded company filed for chapter 11 protection Sunday in the U.S. Bankruptcy Court in Houston. Sales of apparel have plunged since March when many stores temporarily shut and millions of Americans started working from home. Upscale menswear rival Brooks Brothers Group Inc. recently filed for bankruptcy, as did Ascena Retail Group Inc., the owner of Ann Taylor, a seller of women's office attire.
The move comes after the menswear retailer warned in late July that it had substantial doubt about its ability to continue as a going concern and that it was likely to file for bankruptcy as soon as its third quarter, which begins Aug. 2.
Tailored Brands said that it reached a restructuring support pact with more than three-fourths of its senior lenders that will slash at least $630 million in debt off its books. Existing lenders will also provide $500 million in bankruptcy financing, allowing the retailer to keep its stores open during the chapter 11 case.
The company, which also owns retail brands K&G Fashion Superstore and Moores Clothing for Men, now operates about 1,400 stores and employs about 18,000 people in the U.S. and Canada, down from 19,300 employees as of Feb. 1, according to a securities filing.
A regulatory filing in May showed that money-management giant BlackRock Inc. owned about 15.8% of Tailored Brands' common stock, private investment firm Scion Asset Management LLC had about 8.3% and investment adviser Vanguard Group had about 7.2%.
The company valued its assets at about $2.5 billion and listed total debt of about $2.8 billion in court papers.
In response to the pandemic, Tailored Brands has said it was evaluating various alternatives to improve its liquidity, such as securing rent concessions and deferrals, cutting costs and raising capital.
In mid-March, Tailored Brands temporarily closed all its retail locations. To preserve liquidity, the company furloughed or temporarily laid off all store employees, borrowed $300 million under its asset-based lending facility, suspended rent payments for April and May and negotiated rent deferrals for some stores.
By July, Tailored Brands said it would lay off 20% of its corporate staff, reduce its supply-chain footprint and close as many as 500 retail locations.
Earlier in July, the company skipped a payment to bondholders after it reported a net sales decline of more than 60% for the quarter ended May 2 compared with the year-earlier period. The missed $6.1 million coupon payment, on $600 million of senior notes that are due in 2022, started the clock on a 30-day grace period that ends the first week of August.
Before filing for bankruptcy, Tailored Brands said it would pay about $3.3 million in incentive compensation to its executives. In recent months, a number of other companies have paid out retention bonuses to top management just before seeking bankruptcy protection.
Other apparel retailers pushed into bankruptcy due to the pandemic include J.C. Penney Co., Neiman Marcus Group Ltd. and J.Crew Group Inc.
Tailored Brands said in court papers that its management continues to negotiate a restructuring support agreement with stakeholders. The company also plans to obtain bankruptcy financing from its lenders led by JPMorgan Chase Bank N.A.
The company has hired law firms Kirkland & Ellis LLP, Jackson Walker LLP, Stikeman Elliot LLP and Mourant Ozannes. It also hired financial adviser PJT Partners LP, restructuring adviser AlixPartners LLP and real estate adviser A&G Realty Partners LLC.
The case is number 20-33900.
Write to Aisha Al-Muslim at firstname.lastname@example.org