Tailored Brands unsecured creditors object to plan of reorganization

By Sarah Lizee

Olympia, Wash., Nov. 9 – Tailored Brands, Inc.’s fourth amended joint plan of reorganization drew an objection Friday from the official committee of unsecured creditors, according to a filing with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee said the plan cannot be confirmed because it is based on a “flawed and artificially depressed” enterprise valuation that results in the term lenders receiving more than the amount of their secured claims at the expense of general unsecured creditors.

“At the debtors’ suggested enterprise value of $850 million, the plan provides that the term loan lenders will receive 97% of the reorganized equity and class 5(b) general unsecured creditors, including the term loan lenders’ purported deficiency claim, will receive the remaining 3%, each subject to dilution by a management incentive plan,” the committee said.

“Given the debtors’ depressed valuation and resulting term loan lender deficiency claim, purportedly $318.8 million, a 3% distribution on approximately $430 million in total general unsecured claims amounts to a 1.5% equity distribution to non-term loan lenders class 5(b) general unsecured claims.

“Thus, the plan’s equity split essentially provides $2.8 million in equity value to general unsecured creditors or less than a 1% recovery.”

The committee said that based on a valuation undertaken by Michel Shaked Group, the debtors’ total enterprise valuation upon emergence from bankruptcy is $1,498,000,000.

Using this valuation, general unsecured creditors would be entitled to 38% of the equity of the reorganized debtors, the committee claims.

The committee added that based on preliminary voting, general unsecured creditors have overwhelmingly rejected the plan.

A hearing on confirmation of the plan is set for Nov. 12.

Tailored Brands is a Fremont, Calif.-based specialty retailer of men’s tailored clothing. The company filed bankruptcy on Aug. 2 under Chapter 11 case number 20-33900.

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