Crafts Retailer Joann Files for Bankruptcy

Fabric and crafts retailer Joann Inc. has filed for bankruptcy after struggling to sustain its debt load following a sales boom during pandemic lockdowns. The Hudson, Ohio-based chain will be privately owned by certain lenders and industry parties after the bankruptcy proceedings conclude.

Restructuring Deal and Debt Reduction

Joann’s lenders have reached a restructuring deal that includes providing approximately $132 million in new financing. This infusion of funds will enable the company to reduce its debt by about $505 million. Additionally, the parties involved in the deal have agreed to a six-month extension of certain loans and credit facilities. These measures aim to alleviate some of the financial burdens faced by the retailer.

Changing Consumer Habits and Declining Revenues

Joann, like many other retail companies, has been grappling with shifting consumer shopping habits and a decline in revenues over the years. However, the pandemic provided a brief respite as consumers turned to at-home activities like crafting. In an environment of relatively high interest rates and inflation, consumer discretionary companies have borne the brunt of these changing trends. In fact, they accounted for the highest number of US corporate bankruptcy filings last year since 2010, according to S&P Global.

Pre-Packaged Bankruptcy Filing

Joann’s bankruptcy filing falls under the category of a “pre-packaged” filing, in which restructuring terms are mostly settled with creditors in advance. The company listed its assets with a value ranging from $500 million to $1 billion. Its largest unsecured creditor is craft yarn provider Spinrite Corp.

Business as Usual

Despite the bankruptcy proceedings, Joann stores and its online platform, JOANN.com, will continue to operate normally. The company assures customers, vendors, landlords, and other trade creditors that there will be no disruption in services.

“This agreement is a significant step forward in addressing Joann’s capital structure needs,” said Scott Sekella, CFO and co-lead of the interim office of the CEO.

Conclusion

Joann’s bankruptcy filing reflects the challenges faced by many retail companies in adapting to changing consumer preferences and economic conditions. While the pandemic initially provided a boost to the crafting industry, Joann’s debt load and other issues created a struggle for the company. With the restructuring deal and support from lenders, Joann aims to complete the restructuring process in the coming months and continue serving its customers in the long run.

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