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Joan Fabrics declares Chapter 11, obtains DIP financing

Tyngsboro, Mass. – Joan Fabrics Corp., and its wholly owned subsidiary Madison Avenue Designs, have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The petitions were filed Monday, April 9 in Delaware. The company has entered into debtor-in-possession (DIP) financing agreements with their lenders, led by Bank of America as its administrative agent and CIT, its factor, for more than $10 million.

Last week Joan Fabrics president and ceo Elkin McCallum stepped down, but retained a seat on the board. Restructuring consultant Carl Marks Advisory Group took over day-to-day operations as of March 20 and is exploring strategic alternatives for the company.

Richard Heller of Carl Marks, now coo, said, “Joan Fabrics has many positive advantages as a business…their quality products, strong customer base and excellent design team provide a solid foundation for the business to be restructured and emerge successfully from Chapter 11.”

In papers filed with the bankruptcy court, Joan said it has contacted approximately seven potential purchasers of various lines of business and has entered into confidentiality agreements with six of them.

The filing noted that Carl Marks Advisor Group has concluded “there is a realistic prospect for disposing of various brands in the near term pursuant to an orderly court-supervised sale process for sums far greater than their liquidation value outside of a bankruptcy proceeding.”

Founded in 1932, Joan operates four manufacturing facilities in North Carolina – weaving jacquard in Siler City and Connelly Springs; weaving velvet in Hickory; and finishing fabric in Cramerton. The company also weaves jacquard in Texel, Mexico at a factory in which it holds an 80% stake.

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