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Joan Fabrics Files For Chapter 11

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Joan Fabrics Corporation, a highly specialized integrated textile fabric company and its wholly owned subsidiary Madison Avenue Design, which creates specialty designs for Joan Fabrics and other parties, announced today that they have filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. The companies, which filed in Delaware, intend to utilize the Chapter 11 process to reorganize their business and financial operations. The companies are represented in the Chapter 11 proceedings by a team of attorneys at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., headed by Richard E. Mikels. During this process Joan Fabrics and Madison Avenue Designs will be fully operational serving their more than 700 clients in the residential, hospitality and “contract” sectors (textile products for office furniture/wall covering used in hotels, businesses, hospitals etc.) in the Canadian, Mexican and US markets. Carl Marks Advisory Group, a business advisory and interim management firm, has taken over day to day operations. Former President and CEO Elkin McCallum stepped down last week, but remains on the Board. Richard Heller, Chief Operating Officer, said, “Joan Fabrics has many positive advantages as a business. They ran into some recent challenges due to the downturn in the US textile industry caused by, among other factors, increased foreign competition. However, their quality products, strong customer base and excellent design team provide a solid foundation for the business to be restructured and emerge successfully from Chapter 11.” Joan Fabrics, founded in 1932, manufactures top quality woven jacquard and velour fabrics. The companies have manufacturing facilities in North Carolina and an affiliate entity in Mexico. Annually, Joan Fabrics introduces over 1500 new open line designs and provides exclusive designs for the distributor trade and “jobbers” who supply product to the interior design trade and other related businesses. In order to maintain its competitive edge, Joan Fabrics collaborates with a major retail furniture chain, offering an in-store collection of mid-to-high end fabrics. Joan Fabrics’ 700 employees are unaffected by this filing. Customers should expect business as usual in terms of products, delivery and service. The companies entered into debtor in possession financing agreements with their lenders, led by Bank of America as its administrative agent and its factor CIT. Joan Fabrics and Madison Avenue designs have received debtor-in-possession financing of more than $10 million dollars. Heller noted, “This will allow us to meet the companies’ cash needs and give us opportunities to explore strategic options to determine the company’s future. We are already in contact with a number of firms who have expressed interest in acquiring some or all of our operating units. We believe that such a sale will provide the most advantageous result for our employees, customers and creditors.”

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