Tailored Brands: Not looking good

Tailored Brands (NYSE: TLRD), retailing as Moore’s in Canada, filed on Form 8-K that they were not paying their unsecured debtholders:

On July 1, 2020, The Men’s Wearhouse, Inc. (“Men’s Wearhouse”), a subsidiary of Tailored Brands, Inc. (together with Men’s Wearhouse, the “Company”), elected not to make the interest payment due and payable on July 1, 2020 of approximately $6.1 million (the “Interest Payment”) with respect to its 7.00% Senior Notes due 2022 (the “2022 Senior Notes”). Men’s Wearhouse has a 30-day grace period to make the Interest Payment before such non-payment constitutes an “event of default” under the indenture governing the 2022 Senior Notes (the “Indenture”). If an event of default under the Indenture occurs as a result of such non-payment, it would result in a cross-event of default under both the Company’s term loan facility and asset-based revolving credit facility (collectively, the “Credit Facilities”). Men’s Wearhouse has elected to enter into the 30-day grace period with respect to the Interest Payment. During the grace period, Men’s Wearhouse may elect to pay the Interest Payment and thereby remain in compliance with the Indenture.

On July 1, 2020, the Company made its scheduled interest payments required under the Credit Facilities and therefore, as of the date hereof, is current with respect to its interest and principal payment obligations thereunder.

Per their last financial snapshot, and 10-Q, it appears they have approximately $1.2-$1.3 billion in senior debt, coupled with $174 million in unsecured notes, which last traded at 7 cents on the dollar. The company itself, by virtue of drawing its asset-backed facility, has about $200 million in cash (and approx. $90 million in restricted cash) in early June.

It looks like they are engaging in a “Mexican Standoff” strategy that will not go very well for everybody involved – implicitly they are trying to get the unsecured noteholders to concede with the threat that they will go to zero in a Chapter 11 proceeding. The question is what price has been negotiated?

The company, similar to most other retailers, has massive lease liabilities and even if they resolve the unsecured debt situation, still has to face that challenge.