House of Fabrics Gets Credit Line in Restructuring
House of Fabrics Inc., a Sherman Oaks-based chain of retail fabric stores, said Thursday it has secured a $60-million revolving line of credit that effectively will allow it to emerge from Chapter 11 bankruptcy proceedings.
The credit line is from CIT Group for an initial period of three years, effective the end of July. It is a final piece in the chain’s bankruptcy restructuring, said Sandra Sternberg, House of Fabrics spokeswoman.
Pending court and shareholder approval, the company is expected to emerge as “a smaller chain, a stronger chain and a chain with less debt,” Sternberg said. “But it’s clearly one with a lot of work still to be done.”
House of Fabrics entered bankruptcy proceedings in November 1994. Since then, it has closed stores, dropping from 361 in January to 269 now, and laid off more than 1,000 employees.
The 50-year-old chain fell on hard times because of competition and an ill-timed expansion. Since then, besides closing unprofitable stores, the chain has changed its product mix.
Now the company is poised to come out of bankruptcy proceedings with “a viable base on which to grow and debt that will be manageable,” said James Schmitt, an analyst with Somis, Calif.-based Westcountry Financial.
“Thank God we escaped disaster on the thing,” he added.
The chain said it expected to announce today whether it has received court approval for its filed disclosure statement. The statement and a final plan of reorganization must then be approved by creditors and equity holders, and finalized by the court, the company said.
