Craft retailer Joann files for Chapter 11 once again

March 2025 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

March 2025 Issue

In its second bankruptcy filing in less than a year, craft retailer Joann Inc. has commenced voluntary Chapter 11 proceedings to facilitate a sale process to maximise the value of its business.

The Ohio-based retailer believed that its previous debt reduction deal in April 2024 would allow it to resume business as usual, but high inflation, increased competition and supply chain disruption caused “irreparable harm” to its post-bankruptcy business plan, according to court filings.

With estimated assets of $1bn to $10bn and estimated liabilities in the same range, Joann is seeking court approval to commence a process for the sale of substantially all of its assets under section 363 of the US Bankruptcy Code, pursuant to which Gordon Brothers Retail Partners, LLC would serve as the ‘stalking horse’ bidder.

Among other conditions, the proposed transaction is subject to higher and better offers, and Joann continues to actively solicit alternate bids. If other qualified bids are submitted during the court-supervised sale processes, the company plans to conduct an auction or auctions, with the stalking horse bid setting the floor for the auction processes.

Joann’s stores and its website are open in the ordinary course and continue to serve customers. Additionally, through the filing of customary motions with the court, the company intends to uphold its commitments to customers, team members and partners, including continued payment of employee wages and benefits.

To this end, Joann intends to seek approval for a consensual use of cash collateral to ensure it has the liquidity necessary to support its operations.

“Since becoming a private company in April 2024, the board and management team have continued to execute on top- and bottom-line initiatives to manage costs and drive value,” said Michael Prendergast, interim chief executive of Joann. “However, the last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.

“After carefully reviewing all available strategic paths, we have determined that initiating a court-supervised sale process is the best course of action to maximise the value of the business,” he continued. “We hope that this process enables us to find a path that would allow Joann to continue operating as a going concern.”

For more than 80 years, Joann has inspired creativity in the hearts, hands and minds of its customers. Having kept all of its retail stores open during its last bankruptcy, the company currently has 800 stores in 49 states and 19,000 employees, with the goal of helping every customer find their “creative happy place”.

Serving as legal counsel to Joann is Kirkland & Ellis, with Centerview Partners LLC serving as financial adviser and Alvarez & Marsal North America, LLC serving as restructuring adviser.

Mr Prendergast concluded: “We remain committed to continuing to support them and serving our customers – the sewists, quilters, crocheters, crafters and other creative enthusiasts we have served for more than 80 years – during the Chapter 11 process.”

Fraser Tennant