Tailored Brands Is Said To Weigh Bankruptcy Protection; Shares Fall In Pre-Market

Tailored Brands Inc., (TLRD) is reportedly mulling to file for bankruptcy proceedings as demand for new suits stalled during the coronavirus lockdown period which ordered most office workers to stay at home.

The stock declined 1.2% to $1.66 in pre-market trading after dropping 9% on Monday.

According to a Bloomberg report, the retailer and its advisers are approaching interested parties about restructuring its debts of more than $1 billion. One scenario is a Chapter 11 filing, which would allow Tailored Brands to keep some of its stores operating while other weaker locations would close down to satisfy its creditors.

At the same time, Tailored Brands is still looking for alternative forms of financing. The restructuring plans could depend on market conditions and the outlook for stores to re-open, according to the report.

Sales have been dented because shoppers had to stay at home during the pandemic, and canceled events such as weddings and other celebrations, curtailed the need for formal wear. The outbreak of the pandemic could not have come at a much worse moment for Tailored Brands, which has seen sales declining every year since 2016 due to changing consumer tastes and e-commerce rivals.

Last month the retailer said it would reopen 300 stores by Memorial Day. CEO Dinesh Lathi said in early May that the company was taking “aggressive” measures to preserve liquidity, including furloughing or laying off a majority of corporate staff and distribution employees, borrowing from its credit facility and extending payment terms with suppliers, vendors and landlords. The dividend was suspended in September.

Debt issued by its Men’s Wearhouse has cratered to deeply distressed levels since March, with some of its bonds trading below 30 cents on the dollar after sitting near par in February. Meanwhile, shares have this year lost more than 50% of their value.

The stock has a Hold analyst consensus with a $1.50 average price target, which indicates 11% downside potential over the coming year.  

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