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Crafts retailer Joann files for bankruptcy

A Joann store front.

Photo: Daniel Acker/Bloomberg via Getty Images

Crafts retailer Joann filed for Chapter 11 bankruptcy protection in Delaware, it announced early Monday morning.

Why it matters: Crafts retailers have resumed their downward slide following a pandemic boom tied to spending by consumers stuck at home.

Zoom in: The filing was tied to a pre-packaged restructuring plan ironed out among a majority of Joann's financial stakeholders.

  • Creditors will own the newly private company, which will delist from the Nasdaq. Joann backer Leonard Green & Partners still owned 67% of the company's outstanding stock as of Friday.
  • Joann had long-term debt of about $1.15 billion as of Oct. 28, 2023. That's set to be reduced by $505 million while $132 million in new financing has been secured.
  • The parties have also agreed to a six-month extension on both Joann's ABL and FILO credit facilities.

What they're saying: "This agreement is a significant step forward in addressing Joann's capital structure needs," CFO Scott Sekella said in a statement.

  • "This includes our more than 800 stores across the United States, 95 percent of which are cash flow positive," he said.

What's next: Joann hopes to finish the restructuring process by as early as late April, it said.

Catch up quick: Leonard Green took Joann private for $1.6 billion in 2011 when the U.S. was emerging from the financial crisis.

Yes, but: Instead of heralding in a new chapter, the spending burst was a short-lived reprieve for Joann.

What we're watching: Joann is joined by rival Michaels on rating agencies' distressed watchlists; Michaels was downgraded last fall by S&P to CCC+.

The big picture: Though Joann held out longer than most, it joins a vintage of retail LBOs transacted in 2010 and 2011 that ultimately ended up in bankruptcy, including Gymboree and J.Crew.

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