(Bloomberg) — Craft and fabric retailer Joann Inc. filed for bankruptcy protection for the second time in less than a year to quickly find a buyer willing to save the company from liquidation.
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Under a proposed deal with lenders owed more than $450 million, the company must hold an auction within 30 days or risk losing access to cash held as collateral, according to court documents filed Wednesday .
The company must first obtain court approval for the sales process. Joann already has an offer from liquidator Gordon Brothers Retail Partners, which would serve as an initial offer, setting a floor for the value of the business. If higher bids came in by Feb. 12, the company would hold an auction, according to court documents.
Under Gordon Brothers’ proposal, if no higher offer is made to save the chain, Joann would sell to the liquidator, who specializes in closing retailers and making going-concern sales.
Joann’s stores will remain open in the meantime, the company said in a statement.
The company had $615.7 million in funded debt as well as $133 million in owed and unpaid business debt, according to Chapter 11 documents filed Wednesday in a Delaware court.
Joann’s debt situation quickly became unsustainable after its first bankruptcy proceedings, as “unforeseen inventory issues” added to the pressures of a “sluggish retail economy,” interim CEO Michael Prendergast said in a legal file.
Joann’s rapid return to court follows a series of retail bankruptcies in recent months, including Party City Holdco Inc., another regular filer, as well as chains Big Lots Inc. and The Container Store Group Inc. Many retailers have struggled in recent years due to inflation. and interest rates that were for a time the highest in decades.
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Joann’s, based in Hudson, Ohio, filed for Chapter 11 protection in March 2024 to quickly execute a lender-backed debt restructuring. The company emerged from Chapter 11 six weeks later with more than 800 stores and its debt was cut nearly in half to about $555 million, according to court documents. Joann said at the time that the bankruptcy plan had put the chain “in its best financial position in recent history.”
But in November, Bloomberg News reported that Joann had asked suppliers for rebates and retroactive rebates amid falling sales. A spokesperson said at the time that the retailer was seeking additional support from its suppliers. Bloomberg reported separately in early January that Joann was working with advisors to help shore up its balance sheet and ease liquidity pressures.
