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ZEOIX misses

a company that had enough cash on hand to pay interest decides not to. Is it unreasonable to expect that in March they should have known Proms were DOA for the time being?


  • It's not just tux rentals but clothing sales (Men's Wearhouse, Jos. A. Bank, etc.). "There is not going to be as much demand given the work from home environment." (CNN story, link below.)

    Tailored Brands had been working with bankruptcy advisors as early as mid-April. It wasn't as confident about its cash cushion as was Zeo Capital Advisors.

    Given the company's concerns over viability, it doesn't seem unreasonable that it took advantage of a standard grace period in the terms of the bonds. The semiannual interest payment was due July 1, but won't be in default until July 31.

    As of Oct 31, ZEOIX owned $13.6M (par) in Men's Warehouse bonds, valued at $13.3M. The fund increased its position slightly, holding $14.8M (par), valued at $14.6M at the end of January.

    But then ZEOIX doubled down, literally, increasing its position to $27.0M (par) as of April 30th. However, those bonds were valued at only $11.3M (42¢ on the dollar), a drop of 4/7 in value in three months.

    Maybe Zeo thought it was getting a bargain basement deal, if the price had dropped before purchasing the extra bonds. Or maybe it bought all those bonds shortly before Tailored Brands started looking into bankruptcy in April. Hard to tell from the timing.
  • Makes all their talk about being careful a bit concerning, although a small position. But they also have a 7% position in Michael's store bonds
  • It's official, Tailored Brands filed for Chapter 11 bankruptcy on Sunday.
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