Crafts Retailer Joann Set To Exit Bankruptcy Without Closing Stores

Article originally posted on CoStar on April 26, 2024

Joann's store roster is set to remain intact. (CoStar)

Joann, one of the largest U.S. sellers of sewing supplies and fabrics, is set to emerge from Chapter 11 bankruptcy proceedings with an improved balance sheet and its roster of more than 800 stores remaining open.

The Hudson, Ohio-based company said the U.S. Bankruptcy Court for the District of Delaware approved its prepackaged joint plan of reorganization. The retailer expects to complete its financial restructuring and exit from the court-supervised process in the coming days. It said it will end up with its lowest level of debt in more than a decade.

There have been a handful of retail bankruptcies this year, and some have entailed store closings. Discounter 99 Cents Only Stores said it was shutting all 371 of its stores and then filed for Chapter 11. But when Joann sought bankruptcy protection in March, it vowed not to close stores.

Joann saw a lift in business during the pandemic, when homebound Americans took up crafts and had extra money to spend from COVID-19 stimulus payments.

But things took a turn for the worse when people did less sewing and crafting and spent their stimulus money. E-commerce and rivals such as Hobby Lobby are also creating a tougher environment for Joann.

The company plans to leave Chapter 11 owned by several of its creditors and industry parties.

“Joann will move forward with a strengthened financial foundation,” said Chris DiTullio, Joann chief customer officer and co-lead of the interim office of the CEO, said in a statement.

When Joann filed for Chapter 11, it said it had received commitments for about $132 million in new financing.

In its prepackaged filing, the retailer said it had reached a restructuring agreement with most of its stakeholders that will slash its roughly $1.06 billion in funded debt by about $504.7 million, to $555.5 million.

The 80-year-old company has 829 stores across 49 states.

For the Record

Latham & Watkins is serving as legal counsel to Joann, with Houlihan Lokey serving as financial adviser and Alvarez & Marsal North America serving as restructuring adviser. Gibson Dunn & Crutcher is serving as legal counsel to some of the company’s term lenders, with Lazard serving as financial adviser.