- Associated Press - Tuesday, February 2, 2016

BALDWYN, Miss. (AP) - Fabric and sewing supply retailer Hancock Fabrics filed for Chapter 11 bankruptcy protection Tuesday, seeking to reorganize for the second time in nine years.

Senior Vice President Dennis Lyons, in a court document, said Hancock wants to close at least 70 money-losing stores among the 250-plus stores it operates in 37 states, leaving it with “a smaller, more profitable core group of stores.”

The company, based in Baldwyn, Mississippi, made the filing Tuesday in U.S. Bankruptcy Court in Delaware, saying that revenues for the holiday retail season were $8 million below expectations, that it’s burdened by high debt costs and that its borrowing limit has been cut.

“We believe the restructuring is a positive step for the future of the company and we are committed to providing our customers quality fabrics and crafting essentials, both online and in stores,” CEO Steve Morgan said in a statement.

Hancock says it owes about $110 million to banks and vendors. The company said in its bankruptcy petition that it has between $100 million and $500 million in assets. The company has arranged bridge financing during bankruptcy from a group of lenders led by Wells Fargo & Co. Those banks have claims on Hancock’s assets to secure nearly $80 million in pre-existing loans.

The company said it’s seeking a buyer for remaining stores, with a bid deadline of March 9. Lyons said Hancock is “optimistic” that debtholders or another buyer will submit a bid. However, Lyons said the company has a backup bid from the same liquidation firm hired to close other stores if no one seeks to keep running the remaining 185 or so stores.

Hancock said it sought pre-bankruptcy bids among 69 potential buyers late last year, but no one made an offer, citing the company’s poor operating results and debt. Lyons said that among other problems, the company was hit by a $4 million increase in employee retirement plan costs in 2014.

The company’s revenues fell by 5 percent last year to $269 million, and Hancock said it will post a loss for the 12-month period ended Jan. 31, blaming in part a difficult retail environment.

Hancock said it has about 4,500 employees. Of those, about 4,150 work in stores, while others work at the company’s headquarters and distribution warehouse in Baldwyn.

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