Tuesday Morning files Chapter 11 bankruptcy in response to Covid-19

By Caroline Salls

Pittsburgh, May 27 – Tuesday Morning Corp. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Northern District of Texas to pursue a financial and organizational reorganization designed to allow it to reduce its outstanding debt and strengthen its overall financial position, according to a company news release.

Tuesday Morning said these actions are being taken in response to the immense strain the Covid-19 pandemic and related store closures have put on the business. Ultimately, the company said this process will give it an opportunity to continue navigating the Covid-19 pandemic and emerge as a stronger company by early fall.

To enable continued operations during the reorganization process, the company has obtained a commitment from its existing lender group to provide $100 million of debtor-in-possession financing. Tuesday Morning said it is required under the DIP agreement to obtain a commitment for up to $25 million of additional financing, which it is negotiating.

JPMorgan Chase Bank, NA is the DIP financing agent.

The facility will mature on the earliest of 180 days after the bankruptcy filing date, the entry of an order approving the sale of substantially all of the Tuesday Morning debtors’ assets, the effective date of any plan of reorganization, the date of acceleration of the loan and the occurrence of an event of default.

Interest will accrue at Libor plus 300 basis points, with a 2% floor.

Store update

Following the closure of its entire store portfolio as a result of Covid-19, Tuesday Morning said it has re-opened more than 80% of its existing store footprint to date and expects to continue store re-openings and bringing associates back to work over the coming weeks.

“The prolonged and unexpected closures of our stores in response to Covid-19 has had severe consequences on our business,” chief executive officer Steve Becker said in the release.

“Prior to the pandemic, we were gaining momentum in our merchant organization, growing our vendor base and improving brands, assortment and value for our customers, while investing in our technology and corporate leadership team.

“However, the complete halt of store operations for two months put the Company in a financial position that can be effectively addressed only through a reorganization in Chapter 11.”

The company said it expects the reorganization process to enable it to realign its store footprint. Following a store-by-store analysis, Tuesday Morning expects to close 230 of its 687 stores to focus on high-performing locations under a phased approach. The store closure process will take place over the summer.

The company has requested bankruptcy court approval to close at least 132 locations in a first phase and, eventually, the Phoenix distribution center that supports those stores.

Great American Group, LLC will conduct the store-closing sales in exchange for a fee of 1.5% of all gross proceeds from merchandise sold and 15% of gross proceeds from the sale of furniture, fixtures and equipment.

In addition, Tuesday Morning said it plans to attempt to renegotiate a significant number of leases during this process. Of the remaining 555 stores, the company plans to exit about 100 additional locations leaving a go-forward footprint of 450 stores.

Debt details

According to court documents, Tuesday Morning had $92 million in total assets and $88.35 million in total debt as of April 30.

The company’s largest unsecured creditor is Revman International Inc. of Spartanburg, S.C., with a $1.39 million trade vendor claim. No other unsecured creditors were listed with claims of $1 million or more.

Haynes and Boone, LLP is serving as legal adviser, Miller Buckfire is serving as financial adviser, and AlixPartners, LLP is serving as restructuring adviser to Tuesday Morning.

Tuesday Morning is a discount, off-price retailer based in Dallas. The Chapter 11 case number is 20-31476.

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