Welcome to the 124th Pari Passu Newsletter, 

Our last restructuring deep dive will be hard to beat, but we will give it a shot today!

In light of the COVID-19 pandemic, we have seen a wave of retail bankruptcies accelerated by the decline of many brick-and-mortar retailers. Following lockdowns, supply chain disruptions, and consumer habits that relied heavily on physical stores, major chains like JCPenney, Neiman Marcus, and Pier 1 Imports have been forced to restructure and file for Chapter 11. 

The case of Tuesday Morning unpacks another dimension of retail bankruptcies and Chapter 22s, one driven by a complete reliance on physical store presence and complicated by third-party financiers. This case also explores the lease obligations, forbearance agreements, and a unique case of shareholder recovery. Tuesday Morning’s Chapter 22 is a long story, but don’t worry—we’ll break it down clearly and simply. Let’s dive in.

Tuesday Morning Overview 

Tuesday Morning was an American off-price retailer that specialized in home goods, décor, and gifts with over 700 locations across the United States [1]. The company operated in 40 states with distribution centers in Phoenix and Dallas.

Tuesday Morning sourced excess inventory, closeouts, and overstocked merchandise from manufacturers and sold them at a fraction of their original retail prices; around 80% of its inventory was domestically sourced [2]. Unlike traditional big-box discounters, Tuesday Morning focused on a boutique-style shopping experience, with frequently changing inventory that encouraged repeat visits. The company primarily served middle- to upper-middle-class customers looking for high-quality home furnishings at bargain prices, competing with retailers like HomeGoods, TJ Maxx, and Big Lots. 

To understand the historic performance, it is worth highlighting two different time periods of the company: FY 2015 and the period from 2016 to 2019. We will first provide a snapshot of the company’s FY 2015 financials, followed by its pre-pandemic profile: 

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