Hancock Fabrics and its wholly-owned subsidiaries have filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code. The company filed the petitions in the U.S. Bankruptcy Court for the District of Delaware. The company believes that the restructuring will allow it to become more competitive in today’s retail market, both in stores and online.

According to a related 8-K filing, Hancock Fabrics has filed a motion with the bankruptcy court seeking approval of DIP financing with a lender group led by Wells Fargo as administrative agent and swing line lender, and GACP Finance, as term agent for up to $100 million. The DIP facility will consist of an $80 million revolver and a term loan facility of $183 million, which will be used for the repayment of all existing obligations with respect to Handcock’s pre-petition senior secured term loan.

The company intends to use the filing to reorganize its capital structure and gain access to liquidity, reduce costs and liabilities, optimize its store operations and locations to meet customer demands and create the most value for stakeholders. The company is considering all possible options for maximizing stakeholder value, including the sale of the business as a going concern in either a single transaction or a series of transactions. It is also reviewing investment options with existing stakeholders and third parties.