Research: Rating Action: Moody’s raises CFR from Men’s Wearhouse to B1

New York, September 14, 2022 — Moody’s Investors Service (Moody’s) today updated the ratings for The Men’s Wearhouse, LLC (“Men’s Wearhouse”), including the Corporate Family Rating (CFR) at B1 from Caa1, the probability of default (PDR) rating at B1-PD from Caa1-PD, and the senior secured term loan maturing in 2025 at B1 from Caa1. The ratings of the company’s senior secured term loans, senior in 2025, have been withdrawn as they were recently repaid in full. The outlook has changed from positive to stable.

“The upgrades reflect the substantial improvement in operational performance, credit metrics and liquidity at Men’s Wearhouse since the company emerged from Chapter 11 bankruptcy in December 2020,” said Mike Zuccaro, vice president. from Moody’s. “We expect the company to maintain strong credit metrics and very good liquidity over the next 12 to 18 months despite the very challenging environment.”

Updates :

..Issuer: The Men’s Wearhouse, LLC

…. Corporate family ranking, upgraded to B1 from Caa1

…. Default scoring probability, upgrade to B1-PD from Caa1-PD

…. Senior secured term loan, upgraded from Caa1 (LGD4) to B1 (LGD4)

Withdrawals:

..Issuer: The Men’s Wearhouse, LLC

…. Senior Secured Term Loan, PIK Priority, Withdrawn, Previously Rated B3 (LGD3)

…. Senior, Senior, Withdrawn, Previously Rated B3 (LGD3) Secured Term Loan

Outlook Actions:

..Issuer: The Men’s Wearhouse, LLC

…. Outlook, changed to stable from positive

RATINGS RATIONALE

Men’s Wearhouse’s B1 CFR reflects the company’s strong credit metrics which have resulted from profitable revenue growth, strong free cash flow generation and debt reduction. According to Moody’s estimates, the company’s lease-adjusted debt/EBITDAR, pro forma for the repayment of its Senior Term Loans in August 2022, was less than 1.5 times and EBIT interest coverage of approximately 4. 5 times. The rating also reflects governance considerations, including its private ownership. Its balanced approach to capital allocation and its commitment to a conservative debt profile are also reflected in the rating. Men’s Wearhouse’s significant scale in the menswear market is also taken into account, offering a similar product line and diversity of brands, with each brand focusing on different demographics. Although the company operates in a relatively narrow segment of the apparel industry, primarily selling and renting men’s tailored and polished casual wear for business and special occasions, Moody’s considers this category to generally have less risk associated with fashion than most apparel retail segments. The rating is limited by the company’s high business risk as a clothing retailer, and the continued risk associated with the sustainability of its business recovery as the company continues to work to improve its business model and offerings. of products and that pent-up demand has also likely contributed to the strong recent performance. Significant uncertainty remains regarding the potential normalization of demand, as well as increasing global economic challenges.

Liquidity is very good, supported by balance sheet cash, positive annual free cash flow and ample excess revolver availability, all of which should be sufficient to cover cash requirements over the next twelve months.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

The stable outlook reflects our expectation that the company will maintain strong credit metrics and very good liquidity over the next 12-18 months despite a very challenging environment.

An upgrade is unlikely in the short to medium term given Men’s Wearhouse’s private ownership and emphasis on menswear. Factors that could lead to an upgrade include a significant increase in product diversity while maintaining conservative financial policies and very good liquidity. Quantitative metrics include Moody’s debt to EBITDA ratio maintained below 3.0 times and EBIT to interest ratio maintained above 3.0 times.

Ratings could be downgraded if operating performance deteriorates, liquidity weakens or financial policies become more aggressive such that debt/EBITDA is maintained above 4.0x and EBIT/interest maintained at below 2.25 times.

The Men’s Wearhouse, LLC is an omnichannel specialty retailer of men’s apparel, including suits, formal wear and a wide selection of business casual offerings. The company operates more than 1,000 stores in the United States and Canada under the brands Men’s Wearhouse, Jos. A. Bank, Moores Clothing and K&G. Annual revenues exceed $2.6 billion. The parent company, Tailored Brands, Inc., and certain subsidiaries emerged from Chapter 11 bankruptcy on December 1, 2020.

The main methodology used in these ratings is Retail published in November 2021 and available on https://ratings.moodys.com/api/rmc-documents/356421. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Michael M. Zuccaro
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Margaret Taylor
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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