Sad news.
marcella
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March 21, 2007 Hancock Files Chapter 11 Hancock Fabrics announced today it has filed a voluntary petition for Chapter 11 relief. Its subsidiaries are also filing for the same relief. The company took the action so it can use the reorganization process to improve the company's operating performance, reduce its secured debt over time, close underperforming locations, and exit Chapter 11.
Hancock has negotiated a consensual $105 million debtor-in-possession financing arrangement with Wachovia Bank, N.A., in which Hancock will gain additional borrowing capacity necessary to operate successfully under Chapter 11. The company is also in the final stages of negotiating an additional loan of up to $17.5 million with another lender.
Yesterday the company announced it was closing 104 stores in addition to 30 store closings it announced on February 8.
Jane Aggers, president and ceo, said, ?The process of reorganizing Hancock Fabrics under Chapter 11 is a necessary step to reposition the company for the future. It allows us to focus our attention and resources entirely on further improving our better-performing stores and right-sizing our back-office operations and distribution center. We intend to complete the reorganization as quickly as possible, while taking the actions necessary to preserve value for our creditors, customers, employees, and other stakeholders.?
Hancock has filed a number of ?First Day Motions? in the bankruptcy court to support its employees, customers, vendors, and other stakeholders. Among other things, the court filings include requests to continue to pay Hancock employees and to fulfill the needs of the company's customers as they relate to gift cards, merchandise returns, classes, and other services.
March 20, 2007 Hancock to Close 104 Stores; Receives Default Notice Hancock Fabrics announced today it is closing 104 stores in addition to the 30 store closings disclosed in a press release dated February 8. The additional closings represent approximately $75 million in annualized sales.
The company has expanded its existing engagement of a national liquidation firm to assist it with the inventory liquidation sales in these stores over the next three to four months. In addition, it has selected a national real estate firm to assist in the disposition of the leases for the closing stores.
Jane Aggers, president and ceo, said, ?We regret the impact that this decision to close stores has on our associates, but we believe it is necessary in order to focus our attention and resources entirely on further improving our stores that are performing well.? According to today's press release, the company is not presently able to reasonably estimate the amount of losses that will occur from this process.
In addition, Hancock reported it has received a notice of default from its bank group due to the previously reported delay in filing its quarterly financial statements for 2006 and due to the company's inability to comply with a financial covenant in the bank credit facility that requires the company to have at least $25 million of excess availability.
In the notice of default, the bank group has indicated its intention to increase the interest rate on borrowings and the fees on letters of credit to the default rates, which are two percentage points higher than normal. In addition, the bank group asserts that it may direct the company's depository banks to transfer all cash deposits to the bank group in order to pay down borrowings under the bank credit facility.
In light of these developments, Hancock is exploring its strategic alternatives in its continuing effort to maximize the value of its enterprise for its stakeholders.