November 13, 2020 – The Court hearing the Tailored Brands cases confirmed the Debtors’ Fifth Amended Plan of Reorganization [Docket No. 1221]. Earlier that day, the Debtors had filed their Fifth Amended Plan of Reorganization, with a redline showing changes to the version filed on October 9, 2020 [Docket No. 1210].

On August 2, 2020, Tailored Brands, Inc. and 17 affiliated Debtors (then NYSE: TLRD; “Tailored Brands” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 20-33900 (Judge Isgur). At filing, the Debtors, a leading omni-channel specialty retailer of menswear, noted estimated assets of $2,482,124,043 and estimated liabilities of $2,839,642,691 ($1.4bn of funded debt).

The amended Plan reflects a settlement with the Debtors' official committee of unsecured creditors (the "Committee") brokered by Judge David Jones during a recently completed mediation process. That deal will see holders of Class 4 claims (“Term Loan Secured Claims”) cede 7.5% of what would have otherwise been 100% of the emerged Debtors' equity to holders of Class 5(b) claims (“Other General Unsecured Claims”). The 7.5% is to be placed in a newly created liquidating trust which has been established "with no other objective… [except] to maximize the distribution available to Holders of Allowed Class 5(b) Claims." NB: Class 5(b) also has a cash option based on a “Cash Option Price….equal to $16.94 per share of New Equity," although what this would actually provide in the way of cash will not be clear until te Debtors file further documents including a shareholders agreement and revised transaction steps.

In a press release announcing the Plan confirmation, the Debtors stated that, “Under the terms of the Plan, Tailored Brands will emerge with a strengthened capital structure having eliminated $686 million of funded debt from its balance sheet. The capital structure of the reorganized company is expected to consist of a $430 million ABL facility, a $365 million exit term loan and $75 million of cash from a new debt facility to support ongoing operations and strategic initiatives.”

The following is an updated summary of classes, claims, voting rights and expected recoveries (defined terms in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below):

• Class 1 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 100%.
• Class 2 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 100%.
• Class 3 (“ABL Facility Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $398.2mn and expected recovery is 100%.
• Class 4 (“Term Loan Secured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $558.3mn and expected recovery is 63.7%. Each Holder shall receive its Pro Rata share of and interest in (i) the Exit Takeback Term Loan Facility; and (ii) 92.5% of the New Equity (subject to dilution by the Exit New Money Term Loan Equity Backstop Fee, the Management Incentive Plan, and less the New Warrants.
• Class 5(a) (“Moores General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $15.0mn (reduced from $16.2mn) and expected recovery is 100%. Holder shall receive, at the option of the applicable Debtor(s), with the reasonable consent of the Required Consenting Term Loan Lenders, either: (i) payment in full in Cash of the due and unpaid portion of its Allowed Class 5(a) Claim on the later of (x) the Effective Date (or as soon thereafter as reasonably practicable) or (y) as soon as practicable after the date such Claim becomes due and payable; (ii) Reinstatement of such Allowed Class 5(a) Claim; or (iii) such other treatment rendering its Allowed Class 5(a) Claim Unimpaired.

NB: “Holders of Moores General Unsecured Claims in Class 5(a) receive different treatment than Holders of Other General Unsecured Claims in Class 5(b) because, although all Debtors have experienced and continue to experience COVID-19 disruptions, the Moores Debtors are solvent entities while the other Debtors are not. Such disparate financial conditions stem from the substantially lower funded indebtedness of the Moores Debtors relative to that of the other Debtors. The Moores Debtors are neither borrowers nor guarantors under the Term Loan Facility. Additionally, while Moores the Suit People Inc. is a borrower under the ABL Facility, the ABL Facility has been refinanced in full under the DIP ABL Facility (subject to the Challenge Deadline (as defined in the Final DIP/Cash Collateral Order)), under which the Moores Debtors are guarantors but under which there is no balance currently outstanding or anticipated to be outstanding upon emergence. Because the Moores Debtors are solvent as a result of the prepetition capital structure and the transactions consummated pursuant to the Final DIP/Cash Collateral Order, recoveries on account of Claims against the Moores Debtors are thus expected to be paid in full, which justifies classifying such Claims separately from Other General Unsecured Claims.”

• Class 5(b) (“Other General Unsecured Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $722.7mn (including $318.8mn Term Loan Deficiency Claims). Each Holder shall receive, at the option of such Holder, either: (a) the Liquidating Trust Equity Recovery or (b) the Cash Option; provided, that the Term Loan Lenders shall not be entitled to any recovery on account of any Term Loan Deficiency Claims, which shall be deemed waived, extinguished, satisfied, released, and discharged for all purposes on the Effective Date; provided, further, that each Holder of an Allowed Class 5(b) Claim shall be receive the treatment set forth in their Class 5(b) Election Form.
  • “Cash Option” means the election available to each Holder of an Allowed Class 5(b) Claim (other than Holders of Allowed Term Loan Deficiency Claims), on account of such Allowed Class 5(b) Claim and in full and final satisfaction of such Allowed Class 5(b) Claim, to elect Cash in lieu of such Holder’s Liquidating Trust Equity Recovery at the Cash Option Price, to be paid by the Reorganized Debtors in accordance with Article IV.S.1. of the Plan; provided, that the Liquidating Trust shall cancel the New Warrants and redistribute to the Reorganized Debtors the New Equity attributable to any Holder’s Liquidating Trust Equity Recovery that timely exercises the Cash Option. 
  • “Cash Option Price” means an amount in Cash equal to $16.94 per share of New Equity; provided, that, for the avoidance of doubt, the Cash Option Price shall be determined based solely on the number of whole shares of New Equity such Holder would otherwise been titled to and no additional distributions shall be made on account of partial shares of New Equity.
  • “Liquidating Trust Equity Recovery” means, as to each Holder of an Allowed Class 5(b) Claim, the value associated with (a) its Pro Rata share of either the WPC Equity Recovery Pool or the U.S. Equity Recovery Pool, as applicable, and (b) a Pro Rata share of the New Warrants, in each case with such value to be distributed in accordance with the terms of the Liquidating Trust Agreement; provided, that, for the avoidance of doubt, any Holder of an Allowed Class 5(b) Claim that elects the Cash Option shall not receive any portion of the value associated with the WPC Equity Recovery Pool, the U.S. Equity Recovery Pool, or the New Warrants.
  • “Liquidating Trust Equity” means 7.5% of the New Equity (subject to dilution by the Exit New Money Term Loan Equity Backstop Fee, the Management Incentive Plan, and the New Warrants).
  • “U.S. Equity Recovery Pool” means 7.5% of the New Equity to be contributed to the Liquidating Trust and made available, in the aggregate, to Holders of Allowed Class 5(b) Claims asserted against a United States Debtor, on account of such Allowed Class 5(b) Claims asserted against a United States Debtor (subject to dilution by the Exit New Money Term Loan Equity Backstop Fee, the Management Incentive Plan, and the New Warrants), less the amount of the WPC Equity Recovery Pool; provided, that, for the avoidance of doubt, any Holder of an Allowed Class 5(b) Claim that elects the Cash Option shall not receive any portion of the U.S. Equity Recovery Pool.
  • “WPC Equity Recovery Pool” means that percentage of the New Equity to be contributed to the Liquidating Trust and made available, in the aggregate, to Holders of Allowed Class 5(b) Claims asserted against WPC, on account of such Allowed Class 5(b) Claim asserted against WPC (subject to dilution by the Exit New Money Term Loan Equity Backstop Fee, the Management Incentive Plan, and the New Warrants); provided, that, for the avoidance of doubt, any Holder of an Allowed Class 5(b) Claim that elects the Cash Option shall not receive any portion of the WPC Equity Recovery Pool. The WPC Equity Recovery Pool will be determined by the Liquidating Trustee after a determination of the dollar amount of Allowed Claims asserted against WPC, and is estimated to range between 0.7% and 1.6% of the New Equity.
• Class 5(c) (“GUC Convenience Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $250,000 and expected recovery is 100%. Holder shall receive, at the option of the applicable Debtor(s), with the reasonable consent of the Required Consenting Term Loan Lenders, either: (i) payment in full in Cash of the due and unpaid portion of its Allowed GUC Convenience Claim on the later of (x) the Effective Date (or as soon thereafter as reasonably practicable) or (y) as soon as practicable after the date such Claim becomes due and payable; (ii) Reinstatement of such Allowed GUC Convenience Claim; or (iii) such other treatment rendering its Allowed GUC Convenience Claim Unimpaired. Convenience claims are capped at $5k.
• Class 6 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0% / 100%.
• Class 7 (“Intercompany Interests”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0% / 100%.
• Class 8 (“Existing Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0%.
• Class 9 (“Section 510(b) Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0%.

Voting Results

On November 10, 2020, the Debtors' claims agent filed amended Plan voting results [Docket No. 1213], which were as follows:

• Class 4 (“Term Loan Secured Claims”): 326 claim holders, representing $420,710,921.52 in amount and 100% in number, accepted the Plan.
• Class 5(b) (“Other General Unsecured Claims”): 603 claim holders, representing $355,218,515.61 (or 63.10%) in amount and 43.04% in number, accepted the Plan. 798 claim holders, representing $207,701,603.78 (or 36.90%) in amount and 56.96% in number, rejected the Plan.

Prepetition Indebtedness

As of the Petition date, the Debtors’ capital structure consists of outstanding funded debt obligations in the aggregate principal amount of approximately $1.4bn, including the ABL Facility, the Term Loan, and the Senior Notes. The following table summarizes the Debtors’ outstanding funded-debt obligations as of the Petition date:

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Etlin Declaration”), Holly Etlin, the Debtors’ Chief Restructuring Officer, detailed the events leading to Tailored Brands’s Chapter 11 filing. The Etlin Declaration provides: “Despite its dominant position within the market, the Company has faced certain struggles, with revenue declining by approximately 5.6 percent over the past two years alone. The Company has been impacted by the continuing decline in the brick-and-mortar retail industry generally, recently exacerbated by the impact of the COVID-19 pandemic.

Further, COVID-19 has adversely impacted, and will continue to impact, Company operations in a number of ways, including through supply chain disruptions, reduced store traffic, cancellations of large gatherings such as proms and weddings, temporary store closures, and disruptions to employees working across the corporate structure. More generally, the business depends heavily on consumer discretionary spending, and, as such, sales are particularly sensitive to economic conditions and consumer confidence, which have been significantly affected by COVID-19.”

Key Documents:

The following documents were attached to the Disclosure Statement [Docket No. 845]:

• Exhibit A: Plan of Reorganization
• Exhibit B: Disclosure Statement Order [Docket No. 813]
• Exhibit C: Financial Projections
• Exhibit D: Valuation Analysis
• Exhibit E: Liquidation Analysis
• Exhibit F: Organizational Structure Chart

The Debtors filed Plan Supplements at Docket Nos. 959, 1000, 1060, 1163 and 1201 which attached the following documents:

• Exhibit A: Form of New Organizational Documents [Docket No. 1060]
• Exhibit B: 1129(a)(5) Disclosure Regarding Directors and Officers [Docket No. 959]
• Exhibit C: Schedule of Retained Causes of Action [Docket No. 959]
• Exhibit D: Form of Exit ABL Facility Credit Agreement [Docket No. 959]
• Exhibit E: Form of Exit Term Loan Facility Credit Agreement [Docket No. 1000]
• Exhibit F: Description of Transaction Steps [Docket No. 959]
• Exhibit G: Schedules of Assumed and Rejected Contracts [Docket No. 1201]
• Exhibit G (i): Redline to Schedules of Assumed and Rejected Contracts [Docket No. 1201]
• Exhibit H: Form of Management Incentive Plan [Docket No. 959]       
• Exhibit I: Form of Exit Liquidity Facility Credit Agreement [Docket No. 1000]

Liquidation Analysis (see Exhibit E to Disclosure Statement [Docket No. 845] for notes)

About the Debtors

According to the Debtors: “Tailored Brands is a leading omni-channel specialty retailer of menswear, including suits, formalwear and a broad selection of business casual offerings. We help our customers look and feel their best by delivering personalized products and services through our convenient network of stores and e-commerce sites. Our brands include Men’s Wearhouse, Jos. A. Bank, Moores Clothing for Men and K&G.”

Read more Bankruptcy News