Tailored Brands said yesterday that it has emerged from bankruptcy protection following a financial restructuring process that helped the U.S. men's fashion retailer eliminate $686 million of debt from its balance sheet, Reuters reported. The Houston-based company in August filed for chapter 11 protection, joining a list of brick-and-mortar retailers succumbing to the hit from the COVID-19 pandemic. It confirmed a restructuring plan last month that consisted of a $430 million lending facility. Tailored Brands said on Tuesday it now operates with a capital structure that includes an exit term loan of $365 million, which it expects will support its ongoing operations and strategic initiatives. The company in July announced plans to cut its workforce by 20 percent and shut as many as 500 stores, in response to the impact of the pandemic.
Ascena Retail Group Inc. wound up bankrupt after cobbling together a collection of clothing retailers that racked up losses for years. Now a new owner with a history of taking on tarnished brands will try to fix them, Bloomberg News reported. Ascena last week said that it agreed to sell its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to Sycamore Partners for $540 million. Sycamore said it planned to keep “a substantial portion” of the brands’ stores and workers. The private equity firm’s agreement to buy the brands comes as the retailer was seeking to confirm its chapter 11 plan. A related bankruptcy hearing has been delayed twice, according to recent court documents. Ascena already got court permission to sell its Justice and Catherines brands, leaving the parent as a bankrupt estate in wind-down. Ascena filed for bankruptcy in July with a plan to close about 1,600 of its 2,800 stores, including all of those in its Catherines chain.
A month after filing for chapter 11 protection, the U.S. Bankruptcy Court for the District of Delaware on Monday approved a pre-packaged restructuring plan for mall owner Pennsylvania Real Estate Investment Trust (PREIT), the Philadelphia Business Journal reported. The Philadelphia company expects to emerge from bankruptcy in early December, later than its initial expectation to be done with the proceedings by the end of November. PREIT is hopeful the reorganization will give it more time and money to become a stronger company. Under the plan, the shopping mall owner will have access to $130 million in new financing as it relates to a senior unsecured facility and the elimination of a $20 million revolving facility designated for repaying mortgages. The company also said that as part of the reorganization, its debt maturity schedule will be extended by three years. None of these proposals are final until the agreements are executed and the company emerges from bankruptcy. PREIT voluntarily filed Nov. 1 for chapter 11 protection after Strategic Value Partners, which owns 5 percent of PREIT’s debt, objected to a restructuring plan that 95 percent of PREIT’s other lenders approved. Strategic Value Partners finally relented and approved the pre-packaged plan. PREIT has continued to operate its malls during bankruptcy. When it filed for bankruptcy, PREIT listed $2.4 billion in total assets and total debt of just over $2 billion. Of its debt, $913 million is an unsecured loan with Wells Fargo, which is its largest creditor.
Lenders to Equinox Holdings Inc. are preparing for talks regarding a potential rescue loan that would help the high-end fitness chain refinance looming debt and avoid bankruptcy, WSJ Pro Bankruptcy reported. A new loan could provide the funding the company needs to bridge the gap until the anticipated widespread distribution of a vaccine for COVID-19 next year, and an eventual return to normalcy for the fitness industry. New York-based Equinox is on the hook for a looming $73 million maturity in February on debt tied to its subsidiary, SoulCycle. The company might also need additional funding to bolster its cash reserves as gym attendance will likely remain thin for months before the vaccine is widely circulated. Talks are in early stages and include professionals representing the company and its lenders, people familiar with the matter said. An Equinox spokeswoman said the company isn’t currently in discussions with lenders.
West Covina, Calif., which sold $204 million of pension bonds in July, is at the fiscal brink because of its ineffective management and raiding of reserves, according to a report yesterday by State Auditor Elaine Howle, Bloomberg News reported. The southern Californian city of about 105,000 residents helped cover salary and benefit costs for its public safety workers by siphoning from reserves, halving its year-end balance in fiscal 2019 to about $10 million over four years, the report said. The city, which has about $227 million in outstanding municipal debt, has made “questionable” financial decisions, has likely understated the impact of the coronavirus pandemic and doesn’t have a fiscal recovery plan, raising the risk of bankruptcy, according to Howle’s report. “West Covina is at high risk of being unable to meet its future financial obligations and provide effective city services,” the audit said. “If West Covina is unable to resolve its structural deficit, it risks becoming embroiled in the lengthy and complex process of declaring municipal bankruptcy.” In July, West Covina’s financing authority sold $204 million of taxable lease-revenue debt rated A+ by S&P Global Ratings, with the top yield of 3.89 percent for a bond maturing in August 2044. A bond due in August 2038 traded on Monday at a 3.12 percent yield, according to data compiled by Bloomberg.
Seadrill Partners LLC said today that it had filed for chapter 11 protection as a means to restructure its debt, in another sign of financial difficulties for the wider Seadrill Ltd oil drilling rig group, Reuters reported. “The company intends to use the bankruptcy process to ensure that all customer, vendor and employee obligations are met without interruption and to complete a consensual restructuring of its debt,” Seadrill Partners said. Seadrill Ltd, which owns 35% of Seadrill Partners, suspended its own interest payments in September after failing to agree amended terms for $5.7 billion of bank debt, and warned that owners may be left with nothing. Founded by Norwegian-born billionaire investor John Fredriksen, the Seadrill group of companies grew to become the world’s most valuable drilling firm before a crash in oil prices in 2014 sent the company into restructuring. Seadrill Ltd emerged from chapter 11 bankruptcy in 2018 after converting billions of dollars of bonds into equity, but the group’s bank debt remained.
The federal government helped millions of Americans through the early months of the pandemic by allowing them to defer payments, with little negative effect, on mortgages and student loans, two markets in which it holds huge sway. But the government’s reach doesn’t extend to credit-card lending, auto loans or personal loans, and borrowers with those forms of debt ended up with much less relief, the Wall Street Journal reported. As a consequence, federal debt relief has been of greater benefit to homeowners and college graduates, many of whom entered the recession in relatively good financial shape. Lower-income workers, who are more likely to rent and to not have a college degree, saw less benefit. Other programs, including expanded unemployment insurance, were more helpful for lower-income workers. The deferral programs, unprecedented in scale, are credited with keeping the economy temporarily afloat. But the divergence in how the programs are playing out reflects that the tools used to restart an economy are usually blunt, and can have unexpected effects. Deferral programs for pausing mortgage or student-loan payments were set out by the CARES Act, the $2 trillion stimulus program passed in March, and shaped by further government involvement. That made them easier to get and more generous and flexible. For example, mortgage servicers were told to let borrowers pause payments for up to a year if their loans were government-backed, and there are rules to protect borrowers from being forced to make up all the missed payments at once. Deferrals on federal student loans are granted automatically, with no interest accruing, through Dec. 31. Deferral programs for credit cards, auto loans and personal loans, meanwhile, were left to lenders and often decided case by case. Many lenders granted customers two to three months of relief before requiring them to start paying again. Some are asking borrowers to pay back their skipped payments in a lump sum.
A bipartisan group of senators is holding discussions to try to get a deal on a fifth round of coronavirus relief amid a months-long stalemate between congressional leadership and the White House, The Hill reported. The talks are one of the first signs of life for a potential coronavirus agreement as congressional Democrats, Senate Majority Leader Mitch McConnell (R-Ky.) and the White House have remained far apart on both the price tag and the policy details. The group includes Republican Sens. Mitt Romney (Utah), Rob Portman (Ohio) and Susan Collins (Maine) as well as Democratic Sens. Chris Coons (Del.), Joe Manchin (W.Va.), Mark Warner (Va.), Michael Bennet (Colo.) and Dick Durbin (Ill.), the No. 2 Senate Democrat. Senators involved in the talks are eyeing an eventual government funding deal as a vehicle for coronavirus relief. Congress has to fund the government — either with a full-year omnibus or with a short-term continuing resolution — by Dec. 11. Any effort to revive the chances of another coronavirus deal faces an uphill path, even as cases climb across the country and some cities and states reinstate restrictions to try to curb the spread of the disease heading into what health experts expect to be a brutal winter season. McConnell has stood firm at pushing for a roughly $500 billion spending package similar to what has been blocked twice in the Senate. Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) say $2.2 trillion is the starting line for any negotiations. Read more.
In related news, Federal Reserve Chairman Jerome Powell said that the central bank’s actions to backstop a range of credit markets after the coronavirus convulsed Wall Street this past spring had unlocked almost $2 trillion to support businesses, cities and states, the Wall Street Journal reported. In testimony prepared for delivery at a congressional hearing today, Powell said that the Fed’s unprecedented steps to stabilize financial markets had largely succeeded in restoring the flow of credit from private lenders. Treasury Secretary Steven Mnuchin on Nov. 19 told Powell that he would not grant extensions for five lending programs that have backstopped markets for corporate and municipal debt and to purchase loans made to small businesses and nonprofits when those programs expire on Dec. 31. Powell didn’t elaborate in his testimony, released yesterday, about the central bank’s disagreement with Mnuchin’s decision. The Fed had earlier said that it would have preferred the lending programs had stayed open because the pandemic emergency hasn’t receded. Mnuchin is slated to testify alongside Powell at today’s hearing and didn’t address the conflict in his prepared testimony. Read more. (Subscription required.)
Click here to access a live web stream of the Senate Banking Committee's hearing "The Quarterly CARES Act Report to Congress" scheduled for 10 a.m. EDT today.
