JOANN: Craft Retailer Files Second Bankruptcy, Closes All 800 Stores

March 6, 2026

JOANN Inc. returned to chapter 11 on January 15, 2025, less than nine months after emerging from a prepackaged restructuring that had reduced its funded debt from about $1.06 billion to $555.5 million. The First Day Declaration attributes the second filing to supply chain disruption: key vendors unexpectedly ramped down or ceased production of critical inventory items after the April 2024 emergence, cutting in-stock levels by more than 10% and triggering a liquidity wall under the ABL and FILO facilities. Unlike the first case, the second filing proceeded as a freefall bankruptcy with no prepackaged plan and no new money DIP facility, moving directly toward a liquidation-oriented agency transaction.

The case reached confirmation in approximately six months. Gordon Brothers Retail Partners served as the stalking horse for an agency liquidation, a two-bidder auction produced a credit bid by the prepetition term loan agent, and all 800-plus stores were closed by May 30, 2025. The Confirmation Order approved a liquidating plan with a wind-down structure, a general unsecured creditor trust, and broad release provisions. The plan went effective on July 16, 2025.

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Debtor(s)	JOANN Inc. and 11 affiliated debtors
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	25-10068
Judge	Hon. Craig T. Goldblatt
Petition Date	January 15, 2025
Confirmation Date	July 10, 2025
Effective Date	July 16, 2025
Total Funded Debt	$615.7 million

Case Snapshot

Causes of Distress and Prior Restructuring

JOANN filed its first chapter 11 petition on March 18, 2024, with a prepackaged plan that was confirmed on April 25, 2024. That case eliminated about $505 million of debt and provided approximately $132 million in new financing commitments. The company emerged with $555.5 million in funded debt across three tranches: a $352.4 million ABL facility, a $109.9 million FILO term loan, and a $153.4 million term loan.

The First Day Declaration identifies supply chain disruption as the primary trigger for the second filing. The post-emergence business plan assumed vendors would continue servicing JOANN at pre-emergence levels. Instead, key vendors unexpectedly ramped down — and in some cases completely ceased — production of critical inventory items after the April 2024 emergence. In-stock levels dropped by more than 10%, triggering what the declaration described as a "liquidity wall" under the ABL and FILO facilities as reduced inventory cut borrowing capacity and near-term cash receipts.

Even after supply conditions improved in the months before the second filing, the harm to JOANN's ability to service its restructured debt was irreparable. The Amended Disclosure Statement cited a prolonged sluggish retail economy and persistent inflation affecting consumer discretionary spending as additional headwinds. The company carried approximately $133 million in merchandise trade debt and roughly $26 million per month in lease expenses across its store base.

Prepetition Capital Structure

The company entered the second case with $615.7 million in total funded debt spread across three secured facilities, each with distinct collateral priorities governed by an ABL/Term Loan intercreditor agreement.

ABL facility. Bank of America, N.A. served as prepetition ABL agent on a revolving credit facility with $331.6 million in outstanding loans and $20.8 million in letters of credit, totaling $352.4 million. The ABL lenders held first priority on inventory, credit card receivables, cash, bank accounts, and related general intangibles, with maturity on June 22, 2027.

FILO term loan. 1903P Loan Agent, LLC served as agent on a $109.9 million FILO term loan facility, also maturing June 22, 2027. The FILO lenders shared ABL priority collateral on a junior basis.

Term loan. Wilmington Savings Fund Society, FSB served as agent on a $153.4 million term loan facility maturing April 30, 2028. The term loan lenders held first priority on equipment, fixtures, real property, intellectual property, and equity interests — all collateral outside the ABL priority basket.

Sale Process and Cash Collateral

The debtors used cash collateral rather than obtaining new money DIP financing, reflecting the immediate sale-focused strategy. The court approved interim cash collateral usage on January 16, 2025 — one day after the petition — and entered a Final Cash Collateral Order on February 26, 2025. Adequate protection for the prepetition lenders included replacement liens, adequate protection claims, and adequate protection payments, all subordinated to a professional fee carve-out.

Stalking horse and auction. Centerview Partners LLC, the debtors' investment banker, conducted a prepetition marketing process. Gordon Brothers Retail Partners, LLC entered into a stalking horse agency agreement providing the floor bid for an asset liquidation, with a court-approved expense reimbursement of up to $1.6 million. The Sale Motion established a bid deadline of February 12, 2025. Two bidders competed at the February 21–22, 2025 auction.

Winning bid. GA Joann Retail Partnership, LLC, acting as agent, and Wilmington Savings Fund Society, FSB, as prepetition term loan agent, submitted the winning bid through a credit bid structure. The transaction was structured as an agency agreement granting GA Joann exclusive rights to conduct going-out-of-business sales of merchandise, FF&E, leases, contracts, intellectual property, and other assets. The court approved the sale on February 26, 2025.

Asset Liquidation and IP Sales

The company announced plans to close 500 of its roughly 800 stores on February 12, 2025. Within weeks, the strategy shifted to a full liquidation of all remaining locations. Liquidation sales began on March 6, 2025 at 790 locations, and all stores were closed by May 30, 2025. Key lease assignees included Burlington Coat Factory, Dollar Tree Stores, and Michaels Stores. Remaining leases were rejected under the plan.

Ditto/Dittopatterns IP. The court entered an IP Sale Order on June 23, 2025, approving the sale of Ditto/Dittopatterns intellectual property — including patents, trademarks, domain names, software, and approximately 700 digital patterns — to SVP Sewing Brands LLC, contracting through Singer Sourcing Limited LLC. Consideration included cash and SVP receiving an allowed general unsecured claim of $8,412,826.57 against Jo-Ann Stores, LLC.

JOANN brand and private labels. Separately, Michaels acquired JOANN's intellectual property and private label brands in a commercial transaction covering more than 600 products across fabric, quilting, sewing, and yarn categories. This transaction flowed through GA Joann Retail Partnership, which held these assets from the February 2025 sale, rather than through direct court approval. The transaction did not include stores. Michaels later introduced a "Knit & Sew Shop" store-within-store concept featuring the JOANN name, available in 840 Michaels stores.

Plan Structure and Creditor Treatment

The confirmation order approved the Second Amended Joint Chapter 11 Plan on July 10, 2025. The liquidating plan established a wind-down structure with a plan administrator, a general unsecured creditor trust, and broad release provisions including debtor releases, opt-in third-party releases, and exculpation with exceptions for fraud, willful misconduct, and gross negligence.


Class 1 — Other Secured Claims	Unimpaired; paid in full
Class 2 — Other Priority Claims	Unimpaired; paid in full
Class 3 — Prepetition Term Loan Claims	Impaired; pro rata share of wind-down proceeds less credit bid amount; projected deficiency of ~$48.4 million with 0–7% projected recovery
Class 4 — General Unsecured Claims	Impaired; pro rata share of GUC Trust interests
Class 7 — Interests in JOANN	Impaired; cancelled and extinguished; 0% recovery

Plan Treatment Summary

Plan administrator. Ann Aber was appointed plan administrator to manage wind-down activities. GUC trustee. Steven Balasiano, through MHR Advisory Group, LLC, was appointed trustee of the general unsecured creditor trust.

Professional fees. The Omnibus Fee Order entered October 6, 2025 approved approximately $24.87 million in total professional compensation for the period January 15 through July 16, 2025. Kirkland & Ellis LLP (lead debtor counsel) received $12.27 million, Centerview Partners LLC (investment banker) received $6.05 million, Kelley Drye & Warren LLP (committee counsel) received $2.62 million, Cole Schotz P.C. (Delaware co-counsel) received $1.50 million, Province, LLC (committee financial advisor) received $1.11 million, Deloitte Tax LLP received $814,000, Pachulski Stang Ziehl & Jones LLP (committee co-counsel) received $458,000, and Kroll Restructuring Administration LLC (claims agent) received $58,000.

Post-Confirmation Wind-Down and Contested Matters

Claims volume and objection activity. More than 19,900 proofs of claim have been filed in the case. The general bar date was April 4, 2025. The plan administrator has filed 29-plus omnibus claims objections through March 2026, resolving more than 2,500 non-GUC claims. Grounds include improper 503(b)(9) administrative priority claims, duplicate filings, overstated claims, and late-filed claims. The GUC trustee has filed its own series of omnibus objections. Both the plan administrator and GUC trustee obtained extensions of the claims objection deadline to July 13, 2026.

Distributions. As of the Q4 2025 Post-Confirmation Report, cumulative administrative claims paid totaled $3.32 million. General unsecured creditors have received no distributions. Total cash disbursements since the effective date were $7.57 million, including $1.45 million in total professional fees for debtor and committee professionals. The plan administrator anticipates filing for a final decree by June 30, 2026.

Adversary proceedings. Three adversary proceedings remain pending. Adversary 25-50139 involves the wind-down debtors' enforcement action against five former vendors — Advantus Corp., Fairfield Processing Corp., Gwen Studios LLC, Low Tech Enterprises, and Poly-Fil — with cross-motions for judgment on the pleadings filed in December 2025. Adversary 25-51022 seeks to enforce the sale order against former vendors who initiated state court litigation in Ohio against former JOANN employees; briefing was completed in February 2026. A related proceeding, Adversary 25-52463, involves a motion to remand vendor claims to Summit County, Ohio.

Burlington property tax dispute. Burlington Coat Factory filed a motion on January 30, 2026 to enforce the confirmation order and assignment order, arguing that Shops at St. Johns, LLC improperly billed Burlington for 2024 real property taxes. Burlington characterizes the taxes as cure costs under section 365(b)(1). Shops at St. Johns counters that the taxes were invoiced on August 15, 2025 — nearly two months after the June 20, 2025 closing date — and accrued as Burlington's obligation under the assignment agreement. The plan administrator filed a reservation of rights.

Plan injunction relief. Two orders have granted former claimants relief from the plan injunction to pursue personal injury claims against available insurance proceeds. Maria Margarita Aguilar Martinez received relief on January 13, 2026 to prosecute a $2.5 million personal injury claim in California state court. Crystal R. Morse received relief on March 5, 2026 to prosecute a $1 million slip-and-fall claim in Florida state court. Both orders limit enforcement to available insurance proceeds; the plan administrator and GUC trust have no obligation to pay self-insured retentions or defense costs.

Key Timeline

Date	Event
March 18, 2024	First chapter 11 petition filed (prepackaged)
April 25, 2024	First chapter 11 plan confirmed; debt reduced from $1.06B to $555.5M
January 15, 2025	Second chapter 11 petition filed (12 debtor entities)
January 16, 2025	Interim cash collateral approved
February 12, 2025	Bid deadline; announced plan to close 500 stores
February 21–22, 2025	Auction (two bidders)
February 26, 2025	Final cash collateral order; GA Transaction sale approved
March 6, 2025	Liquidation sales begin at 790 locations
April 4, 2025	General bar date
May 30, 2025	All stores closed
June 5, 2025	Michaels announced acquisition of JOANN intellectual property
June 23, 2025	IP sale order entered (Ditto IP to SVP Sewing Brands)
July 10, 2025	Plan confirmed
July 16, 2025	Plan effective date
October 6, 2025	Omnibus fee order entered ($24.87M total professional fees)
January 13, 2026	Aguilar Martinez plan injunction relief granted
January 29, 2026	Claims objection deadline extended to July 13, 2026
March 5, 2026	Crystal Morse plan injunction relief granted

Frequently Asked Questions

Why did JOANN return to chapter 11 in 2025?

The first day declaration attributes the second filing primarily to supply chain disruptions: key vendors unexpectedly ramped down or ceased production of critical inventory items after the April 2024 emergence, causing in-stock levels to drop by more than 10% and triggering a liquidity wall under the ABL and FILO facilities.

What was the prepetition capital structure?

The company had $615.7 million in total funded debt across three tranches: a $352.4 million ABL facility (Bank of America), a $109.9 million FILO term loan (1903P Loan Agent), and a $153.4 million term loan (Wilmington Savings Fund Society), plus approximately $133 million in trade debt.

What are the projected creditor recoveries?

Secured and priority claims are unimpaired and paid in full. Prepetition term loan claims have a projected deficiency of approximately $48.4 million with 0–7% projected recovery. General unsecured creditors receive pro rata GUC Trust interests; no distributions have been made as of Q4 2025.

Who bought JOANN's intellectual property?

Two separate transactions: SVP Sewing Brands LLC acquired the Ditto/Dittopatterns IP through a court-approved sale, and Michaels acquired the JOANN brand and private label brands through a commercial transaction via GA Joann Retail Partnership.

Who is the claims agent for the JOANN 2025 case?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notices to creditors and parties in interest.

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This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.