Men’s Wearhouse: Earnings “Mixed”. Dividend Cut.

On September 11, 2019 publicly traded Tailored Brands (ticker: TLRD) – owner of Men’s Wearhouse and other clothing businesses – reported “mixed” second quarter 2019 earnings, according to a news report . Adjusting for a special one time item, EPS is down a fifth from a year ago and sales are off 4%. Most indicative of all, the company has suspended its dividend “to pay down debt”.

There is only one BDC with exposure: Barings BDC (BBDC). We placed the senior loan on the under-performing list from the IIQ 2019, when the BDC discounted the value of the debt by (12%) from (5%) previously. BBDC’s exposure started in IIIQ 2018 and this was expected to be a super-safe loan judging by pricing (L + 325%). Annual investment income of just under $0.600mn is ultimately at risk.

The latest news is likely to cause a further unrealized write-down in the next earnings release, unless the valuation folk take comfort from the savings in cash flow to come from the dividend elimination. We note the 80% drop in TLRD’s stock price in the space of a year and we worry. The credit is rated a CCR 3 (Watch List), but could be headed lower before the year is out.