“We have determined that there is substantial doubt about our ability to continue as a going concern. Although we are evaluating several alternatives, it is likely that we will pursue a reorganization under applicable bankruptcy laws, possibly as soon as during the third quarter of fiscal 2020, which begins on August 2, 2020,” the retailer wrote in the filing.
Tailored Brands said the pandemic had a significant effect on its business, as has been the case with a number of merchants. After a review of the forecast effect of COVID-19 on its cash flows and its ability to meet ABL covenant in the future, the retailer said that it “will not remain in compliance with the fixed charge coverage ratio covenant under the ABL Facility beginning in the fourth quarter of fiscal 2020.”
In the event that the company does not meet this requirement and can’t receive a waiver or amendment from those from which it borrowed, the company said it would be in default with its ABL facility and its debt “could be accelerated.”
An ABL facility default would lead to a default and could accelerate other indebtedness if the retailer can’t receive a waiver or amendment from lenders due to cross-default provisions and rules over its indebtedness.
Tailored Brands also said Moody’s Investor Service and Standard & Poors had reduced its credit ratings during the past many months. “These downgrades, and any future reductions in our credit ratings, could result in reduced access to the credit and capital markets,” the company said. It has also decided to not make a roughly $6.1 million interest payment “due and payable” on July 1 of this year.
In separate news, Tailored Brands said it intends to make changes that will bring about a reduction of approximately 20 percent of its corporate positions by fiscal Q2’s end.