- Tailored Brands subsidiary Men's Wearhouse skipped a $6.1 million interest payment that was due July 1 on a group of bonds, the apparel retailer said in a securities filing.
- The missed payment set in motion a 30-day grace period, after which Men's Wearhouse will go into default. That would also trigger defaults on Tailored Brand's term loan and asset-based facilities.
- While Men's Wearhouse missed its bond payment, Tailored Brands made a scheduled interest payment on its credit facilities due July 1.
Tailored Brands just got closer to the brink, starting a timer that will have to end either in payment, an agreement with lenders or default, which could kickstart a bankruptcy.
The retail world has seen the full range of outcomes of late. Guitar Center similarly missed a payment on its bonds, which took it to the edge of default. But the musical instrument retailer was able to cut a deal with lenders. Through an exchange offer, Guitar Center traded out cash interest payments now for more principal paid to bondholders later, freeing up liquidity in the term. That bought time and kept the retailer out of bankruptcy, though it didn't solve Guitar Center's long-term debt problems. Analysts still expect more restructuring ahead.
Meanwhile, other retailers, including J.C. Penney and Neiman Marcus, that missed debt payments in recent months used the time to prepare for a Chapter 11.
As for Men's Wearhouse and its parent, the company has acknowledged if it can't wrangle more liquidity it may have to file for bankruptcy or even terminate its operations altogether. Bloomberg also reported the company was working with advisers on its debt and was considering Chapter 11.
Earlier in June, the company — which also owns Jos. A. Bank, Moores and K&G — disclosed the possibility of bankruptcy as it reported first-quarter sales were down more than 60% as the COVID-19 weighed heavily on its business and operations.
Mass store closures hit the apparel retailer hard. Even where stores had been open for at least one week, comparable sales earlier this summer were down 65% at Men's Wearhouse, down 78% at Jos. A. Bank and down 40% at K&G. It's an unfortunate turn after the retailer was seeing signs of improvement prior to the pandemic.
Along with the closures and traffic declines, the spread of COVID-19 has slowed purchases of workwear with more employees working from home. CEO Dinesh Lathi said in a previous release that he expects the company's sales to rebuild "gradually" through 2020. He also said the company had already identified trends toward casualization and in digital marketing that the pandemic has accelerated. He added that "we are pleased to have already made progress transforming our business to address these trends."