Navigating JOANN's Bankruptcy: What it means for JOANN Fabric’s Landlords

On March 18, 2024, JOANN Inc., the parent of JOANN Fabrics, filed for protection from its creditors under the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in the District of Delaware. JOANN filed what is known as a “prepackaged” bankruptcy, where the terms of a bankruptcy plan were agreed in advance between JOANN and its lenders. Fortunately for landlords, unlike most recent large retail bankruptcies, JOANN’s bankruptcy plan, if confirmed, will likely result in all existing JOANN Fabric’s retail locations remaining open and JOANN will pay all amounts currently owed to landlords in full. 

JOANN’s Chief Financial Officer stated in a declaration filed with the Bankruptcy Court at the outset of the case: “If the Plan is confirmed, JOANN anticipates that all trade vendor and similar claims will be paid or otherwise satisfied in full in the ordinary course, all stores will remain open, and all of the over 18,000 jobs provided by JOANN will be preserved.” If the prepackaged bankruptcy plan is approved as contemplated, these intentions are undoubtedly a huge sigh of relief for landlords, and assuming the foregoing prepackaged bankruptcy plan is approved—which could happen as early as next month—the bankruptcy should effectively serve as a non-event for landlords. It is worth noting, however, that not every landlord is assured of having its lease assumed—and the proposed plan does contemplate that certain leases might be rejected.   

Notwithstanding the foregoing, there are certain considerations for landlords to keep in mind and look out for both now and during the pendency of the bankruptcy case. First, it is important for landlords to review any possible co-tenancy provisions in other leases within the same shopping centers as their JOANN Fabric’s locations. Second, shopping center owners should review their existing loan documents for notice requirements triggered by the bankruptcy filing. Third, if as part of the bankruptcy case JOANN’s files any notice with respect to the assumption of a landlord’s lease that includes a proposed amount to cure any pre-bankruptcy defaults, it is vital for the landlord to make sure that all past due rent, common area maintenance contributions, property tax payments, and anything else outstanding and owed to landlord as of the date of the bankruptcy filing, including penalties and interest on past due amounts, is included within such filings. 

Given the prepackaged nature of this bankruptcy filing, it appears that JOANN’s landlords may dodge a bullet here. As Honigman has done with all national retail bankruptcy cases, we are ready to assist landlords with questions that arise in navigating the JOANN bankruptcy proceedings and we stand ready to provide practical guidance to safeguard the interests of shopping center owners.