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Hancock to Close 104 Stores; Receives Default Notice
Posted by: admin | March 20, 2007
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.
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