Hancock Fabrics improves financial future
New York -- A major new credit agreement has been secured by the 262 store Hancock Fabric chain with Wells Fargo Capital and the newly formed Great American Capital Partners subsidiary of B. Riley Financial.
The new financing deal, executed a year and a half before an existing credit facility was due to expire, provides the struggling Hancock Fabric chain with a new five year, $100 million asset-backed credit facility from Wells Fargo and a $17.5 million term loan from Great American.
“We are very excited to partner with a premier banking institution such as Wells Fargo. We have had a long-standing partnership with Great American Group and its affiliates, and we look forward to growing the relationship further,” said Hancock Fabric President and CEO Steve Morgan. “The decision was made to negotiate a credit facility with new lenders a year and a half in advance of the expiration of our current facility, in order to strengthen our long term position. By extending the maturity of our senior secured debt and increasing availability under our revolver and term loan we believe we have enhanced our ability to achieve the inventory productivity and operational improvements we have implemented and continue to drive.”
Hancock Fabrics occupies a tough position in the retail landscape. The company describes itself as, “being the authority in fabric, sewing and crafts, serving creative enthusiasts with a complete selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines.” The challenge with that positioning, aside from a general deterioration sewing participation and product demand compared to when the company was founded in 1957, is that Hancock faces several much larger, far better capitalized and more sophisticated competitors such as Walmart, Jo-Ann Fabric and Crafts 850 locations and Michaels nearly 1,300 stores.
By comparison, Hancock operates 262 stores sprinkled among 37 states which means even loyal customers often have to drive past competing retailers’ stores to shop at Hancock. Despite such challenges, Wells Fargo and Great American enter such deals with their eyes open. And in the case of the newly formed Great American and its affiliates, Hancock CEO Morgan credited the firm with providing wise counsel.
"Great American's sound guidance and timely execution by their team over the years have kept us on a solid course. We look forward to building upon our relationship and working with them to execute our many initiatives,” Morgan said. Great American was launched in April by B. Riley Financial to focus on providing asset-based debt opportunities to lower middle market companies.
"The transaction also marks the first investment by GACP since our launch earlier this month, which reflects the significant opportunity to provide underserved middle market companies like Hancock with non-traditional and creative financing solutions,” said John Ahn, president of Great American. “It also underscores B. Riley Financial's powerful origination platform to source proprietary opportunities through our deep industry relationships and network of more than 200 financial professionals."