Joann’s Fabrics is now part of the Chapter 22 club.
The fabrics and crafts retailer on Wednesday filed a Chapter 11 petition for bankruptcy court protection in Delaware. The company said in a statement that the filing would help it facilitate a sale process of the company “to maximize the value of its business.”
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The retailer said its stores under the Joann banner and the website remain open for business and will continue to serve customers.
It inked a deal to sell “substantially all of its assets” with Gordon Brothers Retail Partners LLC, which will serve as the “stalking horse bidder” for the bankruptcy. As the stalking horse, Gordon Brothers’ bid will set the base price for all subsequent potential bidders for the assets. Terms of the agreement have not yet been filed with the bankruptcy court. The court-approve auction allows other qualified bidders to enter into the bidding process, with the hope that there may be other better offers forthcoming, or at least possibly spur a bidding war.
Joann filed its first Chapter 11 petition in March. The pre-packaged deal with lenders allowed the retailer to exit bankruptcy proceedings one month later, with all 815 stores at the time remaining open and keeping 18,00 staff members employed. The retailer currently operates 800 locations.
“Since becoming a private company in April, the Board and management team have continued to execute on top- and bottom-line initiatives to manage costs and drive value,” Joann’s interim CEO Michael Prendergast said. “However, the last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.”
Prendergast said that after reviewing all available strategic paths, it was determined that a court-supervised sale process would be the best way to maximize assets. “We hope that this process enables us to find a path that would allow JOANN to continue operating as a going concern,” he added.
In a statement filed with the court, Prendergast said that Joann “has been forced to adjust to a post-COVID economy that saw a general withdrawal from the spending highs experienced during COVID.” He explained that the pullback meant the specialty chain faced a common problem among retailers, which was “an otherwise healthy post-COVID business burdened by an outsized capital structure and operational cost center.” That combination created liquidity constraints that “impaired” the retailer’s ability to service its debt.