A crafts retailer now declares an official bankruptcy with a restructuring plan hat could allow it to exit the process as a private company.
Joann officially filed for Chapter 11 on Monday according to a press release and documents at the U.S. Bankruptcy Court for the District of Delaware.
The sewing and crafts chain has a transaction support agreement with most of its financial stakeholders and other financing parties, including commitments for $132 million in new funds.
As a result, Joann expects to reduce its funded debt by about $505 million.
Joann also garnered a six-month extension of its asset-based loan and first-in, last-out credit facilities, effective once it exits bankruptcy.
In the meantime, stores remain open and “all obligations to employees, vendors, landlords, and other trade creditors will be paid or otherwise satisfied in full and honored in the ordinary course of business,” per the release.
The retailer has worked to revamp its stores as well as its online operation, but has lost market share as crafting has declined and competition has heated up, according to GlobalData research.
Joann planned to cut some $200 million in supply chain, product and corporate costs, including through agreements with suppliers on price concessions.
The company then raised that target to $225 million in December.
They also closed on a sale-leaseback of its corporate headquarters in Ohio for $34.5 million and planned to use the proceeds to invest in the business, reports Retail Dive.
“None of that was enough to prevent bankruptcy.
In the third quarter, net sales fell about 4% to $539.8 million, and the company’s long-term debt had grown to $1.14 billion.”
“The bankruptcy process will now allow the arts and crafts chain to receive an infusion of cash at the same time as streamlining its operations and reducing debt levels,” GlobalData Managing Director Neil Saunders said.
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Also Read: Massive Clothing Retailer Is Now Shuttering All Stores This Sunday
Other Economy News Today
Three travel companies are now at high risk of bankruptcy according to Creditsafe Group, a financial outlook and credit report company.
Spirit Airlines has been on unofficial bankruptcy watch since the company’s merger with JetBlue fell apart, reports TheStreet.
There are real questions as to whether the super-low-cost airline model works, and Creditsafe sees a real risk of the airline ending up filing for Chapter 11 bankruptcy.
“Earlier this year, Spirit Airlines said it was looking to refinance its debt and hopes to refinance $1.1 billion of debt due in 2025,” according to Creditsafe.
“To make matters worse, the airline doesn’t have a stable track record of paying bills on time.”
Not paying bills on time is often a sign that a company is running out of cash.
“Late payments increased over several months in 2023.
For example, the number of late payments (1-30 days) rose from 7.00% in September 2023 to 30.87% in October 2023.
A similar pattern occurred soon after when the number of late payments (1-30 days) rose from 6.37% in November 2023 to 30.54% in December 2023 and then again to 51.08% in January 2024,” Creditsafe data showed.
Two rental car companies, Avis Budget Group and Hertz are facing similar problems.
“Avis Budget Group’s long-term debt has consistently increased for the last three years, and how late the company paid its bills spiked drastically from 8 days late in March to 31 days in April and remained high until September 2023,” Creditsafe shared.
Hertz has been following a similar path.
“The company’s number of delinquent payments (91+ days) increased consistently during the second half of 2023.
For instance, the number of delinquent payments (91+ days) rose from 4.64% in August to 6.90% in September, then rose again to 10.73% in October 2023, indicating it is having trouble paying its bills,” according to Creditsafe.
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Also Read: A Massive Company Now Announces Unexpected Layoffs in Arkansas
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