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This website was created to assist the Creditors’ Committee in providing access to information to creditors and to solicit and receive comments from such creditors. Please use the tabs on the left hand side of this page to navigate this website and obtain information. If you have any questions or comments you wish to share with the Creditors’ Committee, please send an email by clicking on the tab entitled "Ask a Question."

Debtors' Proposed Plan of Reorganization filed on June 10, 2008

On June 10, 2008, the Debtors filed their proposed Joint Consolidated Plan of Reorganization Under Chapter 11 of the Bankruptcy Code Proposed by Hancock Fabrics, Inc. and its Affiliated Debtors and Debtors in Possession (the “Plan”). To see the Plan, please click here.

The Plan provides for the payment in full of all allowed claims against the Debtors, regardless of category. As described in the Plan, “payment in full” includes the payment of postpetition interest from the Petition Date for holders of (i) Secured Claims, (ii) Priority Claims, (iii) General Unsecured Claims (including Deficiency Claims, Insured Claims, certain Litigation Claims, Reclamation Claims, Claims under section 503(b)(9) of the Bankruptcy Code, and Rejection Claims) and (iv) certain Administrative Claims. In particular, Priority Non-Tax Claims and General Unsecured Claims (including Deficiency Claims, Insured Claims, Reclamation Claims, Claims under section 503(b)(9) of the Bankruptcy Code, and Rejection Claims) will receive postpetition interest at the rate of 4.93% from March 21, 2007 through the Effective Date, or in the case of Disputed Claims, through the Quarterly Distribution Date which is closest to the date that such Disputed Claim becomes an Allowed Claim.

The Plan also provides that holders of stock interests in Hancock Fabrics, Inc. retain such interest after the Debtors exit from bankruptcy pursuant to the Plan. Therefore, the existing stockholders will continue to own Hancock Fabrics, Inc. after it emerges from bankruptcy.

The Plan has the support of the Creditors' Committee which represents the interests and negotiates on behalf of general unsecured creditors. The Plan also has the support of the Equity Committee which represents the interests and negotiates on behalf of the stockholders of Hancock Fabrics, Inc. To view the press release issued by Cooley Godward Kronish LLP, counsel to the Creditors' Committee, with respect to the filing of the Plan, please click here.

Under the terms of the Plan, all claims against the Debtors and interests in the Debtors are not impaired and, therefore, pursuant to the Bankruptcy Code, (i) all creditors and stockholders are deemed to have accepted the Plan and (ii) are not entitled to vote on the Plan. Any creditor or stockholder may still file an objection to the confirmation of the Plan.

To review the Notice of the Confirmation Hearing and Certain Disclosures Regarding the Plan, which sets forth a description of the Plan and a recitation of the most important provisions of the Plan, please click here.

A hearing on confirmation of the Plan is scheduled for July 22, 2008 at 10 a.m., with objections to confirmation due by July 15, 2008 at 4:00 p.m. (Eastern).

General Case Background

On March 21, 2007, Hancock Fabrics, Inc., along with six of its affiliates (collectively, the “Debtors”), each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). The Debtors' cases (collectively, the “Bankruptcy Cases”) are being jointly administered under Case No. 07-10353. The Bankruptcy Cases are pending before the Honorable Brendan Linehan Shannon in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").

The United States Trustee appointed a committee (the “Creditors' Committee”) to represent the general unsecured creditors in this case. A list of the Creditors' Committee members can be found by clicking the "Committee Members" tab on the left hand side of this page.

FACTA Settlement

On or about July 20, 2007, Kathy Aliano (“Plaintiff”), as the named plaintiff and as a representative on behalf of all members of a purported class, asserted that Hancock Fabrics, Inc. (“Hancock”) violated certain requirements imposed by the Fair and Accurate Credit Transactions Act (“FACTA”). Specifically, Plaintiff asserted that Hancock printed more than the last five digits of its customers’ credit or debit card numbers and/or the expiration date of its customers’ credit or debit cards on receipts presented to them at its retail stores, in violation of FACTA, as specifically set forth in the Complaint filed on July 20, 2007, as subsequently amended on or about January 7, 2008. To see the amended Complaint, please click here.

On or about January 7, 2008, Hancock and Plaintiff, on behalf of herself and all members of the purported class, entered into a settlement agreement (the “Agreement”), settling the purported class action. To see the Agreement, please click here. Under the terms of the Agreement, Hancock will, among other things, hold a Sale Event at all of its regularly operating retail store locations on May 26, 2008, for the benefit of class members, at which any person making a purchase transaction will receive an automatic discount of ten percent (10%) off the total purchase price. The settlement also imposes certain other requirements, which are set forth in detail in the Agreement. Both the Equity Committee and Creditors' Committee supported the settlement.

On or about January 7, 2008, Hancock filed a motion (the “Motion”) requesting preliminary and final approval of the settlement of the purported class action, as set forth in the Agreement. To see the Motion, please click here. On January 22, 2008, the Bankruptcy Court preliminarily approved the settlement embodied in the Agreement as fair, adequate and reasonable. To see the order preliminarily approving the settlement, please click here.

On April 9, 2008, the Bankruptcy Court approved the settlement embodied in the Agreement as fair, adequate and reasonable on a final basis. To see the order finally approving the settlement, please click here.

Exit Financing

On April 17, 2008, the Bankruptcy Court authorized the Debtors to (i) enter into a commitment letter and a fee letter for exit financing with General Electric Capital Corporation ("GE Capital") and (ii) pay certain commitment and related fees. To see the Exit Financing Order along with the Commitment and Fee Letters, please click here. The Debtors will use the Exit Financing (the "GE Exit Financing Facility") to, among other things, refinance their existing secured indebtedness, fund a plan of reorganization and finance the Debtors' post-emergence operating expenses and other working capital needs. To see a summary of the terms of the Commitment and Fee Letters, please click here.

On June 18, 2008, the Bankruptcy Court authorized the Debtors to enter into, a commitment letter and fee letter (collectively, the “Letter Agreement”), copies of which can be obtained by clicking this link, with certain holders of Hancock’s common stock to provide a backstop for a rights offering that will provide the Debtors with the additional financing needed to consummate the proposed Plan. As described in more detail in the Letter Agreement, in exchange for the issuance of warrants to purchase 1,500,000 shares of Hancock’s common stock, the counter-parties to the Letter Agreement have agreed to purchase all of the Secured Notes that are not purchased by other eligible stockholders in the rights offering. This ensures that the Debtors will receive the entire $20,000,000 of additional financing required to consummate the Plan and successfully emerge from Chapter 11. The record date for eligibility to participate in the rights offering is June 17, 2008.