Chapter 11 filed by Joann with a plan to cut $500M in debt‍

However, there's a positive aspect to this development: thanks to an arrangement with its lenders, Joann's stores will remain operational, and the company will continue to pay its vendors during the bankruptcy proceedings. Moreover, there's an expectation that the bankruptcy process could conclude as early as next month, indicating a swift resolution to the situation.

Joann filed for Chapter 11 bankruptcy on Monday, accompanied by a restructuring plan that could potentially see the company emerging from the process as a private entity by late next month, as stated in a press release and documents filed with the U.S. Bankruptcy Court for the District of Delaware.

To facilitate this restructuring, Joann has entered into a transaction support agreement with the majority of its financial stakeholders and other financing parties, securing commitments for $132 million in new funds. This move is expected to reduce Joann's funded debt by approximately $505 million.

As part of its restructuring efforts, Joann has also obtained a six-month extension of its asset-based loan and first-in, last-out credit facilities, which will take effect upon its emergence from bankruptcy. In the interim, Joann assures that its stores will continue operations, with all obligations to employees, vendors, landlords, and other trade creditors being fulfilled in the ordinary course of business.

This bankruptcy filing comes as no surprise, given Joann's ongoing struggles over the years. Despite efforts to revamp its stores and online operations, the retailer has faced challenges such as declining crafting trends and increased competition. Although Joann experienced a surge in sales during the pandemic, this momentum dwindled as restrictions eased, leading to a shift in consumer spending habits and a preference for discounts.

Furthermore, Joann's corporate restructuring, including staff reductions and cost-cutting measures, failed to stave off bankruptcy. In the third quarter, net sales declined by approximately 4%, while the company's long-term debt soared to $1.14 billion.

While the bankruptcy process is expected to inject cash into Joann and streamline its operations, it does not negate the need for further improvements. Joann will need to focus on enhancing its value proposition to drive revenue growth, especially in light of ongoing challenges.

Sourced by Retail Dive‍