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Tailored Brands, Inc. – Files Two Sets of Plan Documents as Battle with Creditors’ Committee Over Valuation Heats Up; Still Aims for November 10th Plan Confirmation Hearing

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October 8, 2020 – The Debtors filed two sets of Plan documents, their Second and Third Amended Plans of Reorganization and related Disclosure Statements, with each attaching redlines from the previous version [Docket Nos. 812, 813, 816 and 817].

The Third Amended Plan is lightly amended and the accompanying Disclosure Statement is amended only in respect of the Valuation analysis which notes a change in valuation as to the Debtors' Canadian business [page 575 of Docket No. 817].

The Second Amended Plan includes some significant amendments including in respect of financial projections and valuation. There are also some clarifications as to class sizes and treatments with the Debtors going to considerable lengths to explain why Moores general unsecured creditors fare better than others (100% recovery vs 1.3% recovery). These changes are noted in the summary table below.

Valuation continues to be a point of contention, as do releases, with the Debtors acceding to pressure from their Official Committee of Unsecured Creditors (the "Creditors' Committee") to add a health warning at the beginning of the Disclosure Statement, include a letter from the Committee with their Plan solicitation materials and include the following summary of the Creditors' Committee's position in the Disclosure Statement: "The Creditors Committee has conducted an independent valuation of the Debtors’ assets and its expert has determined that the Debtors’ Plan vastly understates the value of the Debtors’ assets and impermissibly undercompensates the Holders of General Unsecured Claims. The Debtors believe that the Committee’s valuation is based wholly on flawed assumptions and misleading conclusions."

The Creditors' Committee Letter which insists that with a more competent valuation "general unsecured creditors would be entitled to approximately 49% of the Debtors’ reorganized equity – as opposed to the 3% 'tip' proposed under the Plan" is attached to the Creditors' Committee objection at Docket No. 761.

Plan Overview

The Third Amended Disclosure Statement [Docket No. 817] provides, “The Debtors’ efforts to garner support for their restructuring process have borne fruit. The Debtors’ proposed restructuring pursuant to their restructuring support agreement (the ‘Restructuring Support Agreement’) and proposed Plan will substantially deleverage the Debtors’ balance sheet and allow the Debtors to emerge from these cases as a stronger, better-capitalized enterprise positioned for sustained success. The Restructuring Support Agreement includes a provision of liquidity to fund the Debtors’ operations and the administration of these chapter 11 cases through the entry into a new debtor-in-possession asset-based financing facility (the ‘DIP ABL Facility’) with a principal amount of $500 million, including a refinancing of all obligations under the ABL Facility and a ‘roll-up’ of the letters of credit issued thereunder.

The material terms of the Plan are as follows:

  • the reorganized Debtors or affiliates thereof (the ‘Reorganized Debtors’) shall enter into the following exit facilities: (a) a new senior secured, first lien term loan facility in the aggregate principal amount $400 million (the ‘Exit Term Loan Facility’), and (b) a new asset based exit financing facility with aggregate total commitments of $430 million, which shall be on terms reasonably acceptable to the Debtors, the ABL Agent, and the Required Consenting Term Loan Lenders (the ‘Exit ABL Facility’);
  • holders of allowed claims under the DIP ABL Facility shall : (i) if those certain conversion conditions set forth in the DIP Credit Agreement remain unsatisfied as of the Effective Date, be Paid in Full on the Effective Date or (ii) if those certain conversion conditions as set forth in the DIP Credit Agreement are fully satisfied as of the Effective Date, receive its Pro Rata share of and interest in the Exit ABL Facility;
  • holders of allowed claims under the Prepetition Term Loan Credit Agreement shall receive a Pro Rata share and interest in: (i) the Exit Term Loan Facility, and (ii) 100% of the New Equity to be issued by the Reorganized Debtors (subject to dilution by the Management Incentive Plan) less the aggregate amount of New Equity distributed to Holders of Allowed Class 5(b) Claims that select (or are deemed to have selected) the Class 5(b) Equity Election;
  • holders of allowed claims arising under or in connection with the ABL Documents with respect to terminated interest rate swaps shall be Paid in Full in Cash in the amount of the Allowed Swap Claim from the proceeds of the DIP ABL Collateral and, solely to the extent that there is a deficiency of DIP ABL Priority Collateral, from the proceeds of the Term Loan Collateral;
  • holders of Moores General Unsecured Claims 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;
  • holders of allowed Other General Unsecured Claims shall receive, at the option of each such Holder, either: (x) the Class 5(b) Equity Election or (y) the Class 5(b) Cash Election; provided, that Holders of Allowed Term Loan Deficiency Claims shall not be eligible to select the Class 5(b) Cash Election and shall receive the Class 5(b) Equity Election; provided, further, that if any Holder of an Allowed Class 5(b) Claim selects both the Class 5(b) Equity Election and the Class 5(b) Cash Election or fails to select either option, as of the applicable deadline, such Holder shall receive the Class 5(b) Equity Election; provided, further, that the aggregate amount paid to all Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election shall not exceed the Class 5(b) Cash Cap; provided, further, that, in the event the aggregate amount payable to Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election would otherwise exceed the Class 5(b) Cash Cap, such Cash that would have otherwise been distributed to Holders of Allowed Class 5(b) Claims pursuant to the Class 5(b) Cash Election shall be reduced on a Pro Rata basis and such Holder shall instead receive New Equity (subject to dilution by the Management Incentive Plan) with a value equal to twice the Pro Rata reduction of the Holder’s Class 5(b) Cash Election; and
  • holders of allowed GUC Convenience Claims 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.   

The Debtors are confident that they can implement the Restructuring Transactions contemplated by the Plan to maximize stakeholder recoveries and ensure that the Reorganized Debtors can efficiently emerge from chapter 11 and continue to fulfill its promise as an omni-channel specialty retailer of menswear, including suits, formalwear, and a broad selection of polished and business casual offerings in the United States and Canada.”

The following is an amended 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 Term Loan Facility; and (ii) 100% of the New Equity (subject to dilution by the Management Incentive Plan) less the aggregate amount of New Equity distributed to Holders of Allowed Class 5(b) Claims that select (or are deemed to have selected) the Class 5(b) Equity Election.
  • 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 $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 and expected recovery is 1.3%.Each Holder shall receive, at the option of each such Holder, either: (x) the Class 5(b) Equity Election or (y) the Class 5(b) Cash Election; provided, that Holders of Allowed Term Loan Deficiency Claims shall not be eligible to select the Class 5(b) Cash Election and shall receive the Class 5(b) Equity Election; provided, further, that if any Holder of an Allowed Class 5(b) Claim selects both the Class 5(b) Equity Election and the Class 5(b) Cash Election or fails to select either option, as of the applicable deadline, such Holder shall receive the Class 5(b) Equity Election; provided, further, that the aggregate amount paid to all Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election shall not exceed the Class 5(b) Cash Cap; provided, further, that, in the event the aggregate amount payable to Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election would otherwise exceed the Class 5(b) Cash Cap, such Cash that would have otherwise been distributed to Holders of Allowed Class 5(b) Claims pursuant to the Class 5(b) Cash Election shall be reduced on a Pro Rata basis and such Holder shall instead receive New Equity (subject to dilution by the Management Incentive Plan) with a value equal to twice the Pro Rata reduction of the Holder’s Class 5(b) Cash Election.
    • “Class 5(b) Cash Election” means the election available to each Holder of an Allowed Class 5(b) Claim to receive, other than Holders of Allowed Term Loan Deficiency Claims, to receive, on account of such Allowed Class 5(b) Claim and in full and final satisfaction of such Allowed Class 5(b) Claim, Cash in an amount equal to 50% of the value of the New Equity to which such Holder would have been entitled to receive had they selected the Class 5(b) Equity Election; provided, that the aggregate amount paid to all Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election shall not exceed the Class 5(b) Cash Cap; provided, further, that, in the event the aggregate amount payable to Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election would otherwise exceed the Class 5(b) Cash Cap, such Cash that would have otherwise been distributed to Holders of Allowed Class 5(b) Claims pursuant to the Class 5(b) Cash Election shall be reduced on a Pro Rata basis and such Holder shall instead receive New Equity (subject to dilution by the Management Incentive Plan) with a value equal to twice the Pro Rata reduction of the Holder’s Class 5(b) Cash Election.
    • “Class 5(b) Equity Election” means the election available to each Holder of an Allowed Class 5(b) Claim to receive, on account of such Allowed Class 5(b) Claim, its Pro Rata share of and interest in 3% of the New Equity (subject to dilution by the Management Incentive Plan); provided, that each Holder’s share of New Equity (subject to dilution by the Management Incentive Plan) shall be equal to the product of 3% and the Allowed Class 5(b) Claims held by such Holder as a percentage of the total Allowed Class 5(b) Claims; provided, further, that, for the avoidance of doubt, (i) the amount of New Equity to which each Holder that selects the Class 5(b) Equity Election shall be entitled shall not be increased or reduced by the number of Holders of Allowed Class 5(b) Claims that select the Class 5(b) Cash Election, and (ii) any portion of the aggregate 3% New Equity which was designated for Class 5(b) that was not utilized (as a result of the Class 5(b) Cash Election) shall revert to the Holders of Allowed Term Loan Secured Claims.
  • 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%.

The following documents were attached to the Disclosure Statement [Docket No. 817]:

  • 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

Proposed Key Dates:

  • Objection Deadline: November 6, 2020
  • Voting Deadline: November 9, 2020
  • Confirmation hearing: November 10, 2020

Liquidation Analysis (see Exhibit E to Disclosure Statement [Docket No. 817] 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.”

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