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Law360 (August 3, 2020, 12:08 PM EDT ) The parent company of menswear chains Jos A. Bank and Men's Wearhouse said Monday it filed for Chapter 11 in Texas bankruptcy court with a prepackaged equity swap plan in hand to cut $630 million in debt as it deals with the impact of the coronavirus pandemic.
In an announcement Monday of the company's late Sunday Chapter 11 filing, Tailored Brands Inc.'s CEO Dinesh Lathi said while the company had made progress adjusting to the pre-COVID-19 retail environment, the "unprecedented impact" of the pandemic forced the company to "further adapt and evolve."
"Reaching an agreement with our lenders represents a critical milestone toward our goal of becoming a stronger company that has the financial and operational flexibility to compete and win in the rapidly evolving retail environment," he said.
The California-based company said it had commitments for $500 million in debtor-in-possession financing from its existing revolving lenders and that it expected this and its cash on hand would be enough to continue operations through the bankruptcy.
Tailored Brands owns and operates the Men's Wearhouse, Jos A. Bank, Moores Clothing for Men and K&G Fashion Superstore menswear chains. According to its court filings on Sunday, it currently has about 18,000 employees in just under 1,400 stores in the U.S. and Canada.
According to its court filings, it currently has about $1.4 billion in funded debt.
At the first-day bankruptcy hearing Monday afternoon, Tailored Brands counsel Aparna Yenamandra said the company had been dealing with the online competition that has affected other brick-and-mortar retailers, as well as a shift away from formalwear by consumers.
In the company's Chapter 11 declaration, Chief Restructuring Officer Holly Etlin said the company has closed unprofitable stores — 17 in 2019 and about 50 this year — sold off non-core business, adjusted its merchandise offerings and expanded its e-commerce offerings.
She said COVID-19 store closures and the slow reopening of its stores has put pressure on its liquidity and sent it into negotiation with its creditors, resulting in a restructuring support agreement.
Etlin said the proposed plan would swap the current $877.4 million in term loan debt for equity ownership in the reorganized company and a pro rata share of an exit term loan worth between $325 million and $425 million. The DIP lenders would receive a pro rata share of an asset-based exit facility worth between $400 million and $430 million.
The terms of the DIP drew some criticism from U.S. Bankruptcy Judge Marvin Isgur, who said they would require that the final Chapter 11 plan meet the approval of the RSA parties and roll their prepetition debt into post-petition debt and noted that no unsecured creditors committee had been appointed to object.
"I think you can tell I have very big reservations about taking away all flexibility in the case on the very first day," he said.
After some argument and a number of recesses for discussions among the parties, counsel for Tailored Brands and the DIP agent submitted an amended interim DIP order limiting approval to the DIP lenders, who the DIP agent counsel said were only concerned with the viability of the restructured business' financial structure. Judge Isgur approved the order.
The company has retained PJT Partners as its financial adviser and AlixPartners as its restructuring adviser.
Tailored Brands is represented by Matthew D. Cavenaugh, Kristhy Peguero, Veronica A. Polnick and Victoria Argeroplos of Jackson Walker PC and Joshua A. Sussberg, Christopher J. Marcus, Aparna Yenamandra and James H.M. Sprayregen of Kirkland & Ellis LLP.
J.P. Morgan, the agent for the DIP lenders, is represented by Julia Frost-Davies and Christopher L. Carter of Morgan Lewis & Bockius LLP and Sean Davis of Winstead PC.
The ad hoc term loan lender group is represented by John F. Higgins and Aaron J. Power of Porter Hedges LLP and Scott J. Greenberg, Matt J. Williams, Keith R. Martorana and Jeremy D. Evans of Gibson Dunn & Crutcher LLP.
The case is In re: Tailored Brands Inc. et al., case number 20-33900, in the U.S. Bankruptcy Court for the Southern District of Texas.
--Editing by Alyssa Miller and Alanna Weissman.
Update: This story has been updated with additional information from court documents and from the first-day hearing.
For a reprint of this article, please contact reprints@law360.com.
