House of Fabrics Files Reorganization Plan

House of Fabrics Inc., a Sherman Oaks fabric retailer that filed for Chapter 11 bankruptcy protection in November, has filed a reorganization plan with the federal Bankruptcy Court that would allow the company to continue operating and purchasing inventory. However, the company said the plan is likely to undergo some revisions because of continuing negotiations with its creditors and stockholders.

Gary Larkins, House of Fabrics’ chief executive, said he hopes to present a final plan to the court within a few weeks, paving the way for the company’s re-emergence from Chapter 11 by the end of January.

Under the current plan, House of Fabrics would convert about $120 million in short-term bank loans to a 10-year term loan. Unsecured creditors would receive 98% of the common stock initially issued by the reorganized company; however, that stock would be subject to possible dilution in the future from warrants and options. Current shareholders would get 2% of the common stock of the reorganized company, plus warrants to purchase an additional 8%.

House of Fabrics operates 364 retail stores.