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<P id=PARA1 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>UNITED STATES </B></FONT></P>
<P id=PARA3 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA2 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P>
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<P id=PARA4 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>WASHINGTON, D.C. 20549 </B></FONT></P>
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<P id=PARA8 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
<P id=PARA9 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>FORM 8-K </B></FONT></P>
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<P id=PARA11 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>CURRENT REPORT </B></FONT></P>
<P id=PARA13 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>PURSUANT TO SECTION 13 OR 15(d) OF THE </B></FONT></P>
<P id=PARA14 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 12pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SECURITIES EXCHANGE ACT OF 1934 </B></FONT></P>
<P id=PARA16 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA15 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Date of report (Date of earliest event reported): February 2, 2016 (</FONT>February 1, 2016)</P>
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<P id=PARA17 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">
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<P id=PARA19 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman, Times, serif"><B>HANCOCK FABRICS, INC.</B><B>&nbsp;</B></FONT></P>
<P id=PARA20 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Exact name of Registrant as Specified in its Charter) </FONT></P>
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<P id=PARA22 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Delaware</B></FONT></P></TD>
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<P id=PARA23 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
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<P id=PARA24 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>1-9482</B></FONT></P></TD>
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<P id=PARA25 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
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<P id=PARA26 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>64-0740905</B></FONT></P></TD></TR>
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<P id=PARA27 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(State or other jurisdiction<BR>of incorporation)</FONT></P></TD>
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<P id=PARA29 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Commission</FONT></P>
<P id=PARA30 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">File Number)</FONT></P></TD>
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<P id=PARA31 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P></TD>
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<P id=PARA32 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(I.R.S. Employer<BR>Identification No.)</FONT></P></TD></TR></TABLE>
<P id=PARA35 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA34 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>One Fashion Way </B></FONT></P>
<P id=PARA36 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Baldwyn, Mississippi 38824 </B></FONT></P>
<P id=PARA37 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Address of Principal Executive Offices) </FONT></P>
<P id=PARA39 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA38 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>(662) 365-6000 </B></FONT></P>
<P id=PARA40 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Registrant&#8217;s telephone number, including area code) </FONT></P>
<P id=PARA42 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA41 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Not Applicable</B></FONT></P>
<P id=PARA43 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(Former name or former address, if changed since last report) </FONT></P>
<P id=PARA44 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA45 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: </FONT></P>
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<P id=PARA155><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) </FONT></P></FONT></TD></TR></TABLE>
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<P id=PARA53 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) </FONT></P></TD></TR></TABLE>
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<P id=PARA57 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) </FONT></P></TD></TR></TABLE>
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<P id=PARA61 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) </FONT></P></TD></TR></TABLE>
<P id=PARA63 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
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<P id=PARA156><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 1.01</FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA157><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Entry into a Material Definitive Agreement. </P></FONT></B></TD></TR></TABLE>
<P id=PARA66 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA67 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The information disclosed under Item 1.03 of this report under &#8212;<I>DIP Financing</I> is incorporated herein by reference. </FONT></P>
<P id=PARA68 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA158><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item </B><B>1</B><B>.0</B><B>3</B><B></FONT></B></P></TD>
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<P id=PARA159><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Bankruptcy or Receivership</B></P></FONT></B></TD></TR></TABLE>
<P id=PARA72 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA71 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I>Chapter 11 Filings</I></FONT></P>
<P id=PARA74 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA73 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On February 2, 2016 (the &#8220;Petition Date&#8221;), Hancock Fabrics, Inc. (&#8220;Hancock&#8221;) and </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">all of Hancock&#8217;s direct and indirect subsidiaries (collectively</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> with Hancock, the </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8220;Debtors</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8221;)</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> filed</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> voluntary petitions for relief (the &#8220;Bankruptcy Petitions&#8221;) under c</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">hapter 11 of t</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">itle 11 of the United States Code (the &#8220;Bankruptcy Code&#8221;) in the United States Bankruptcy Court for the District of Delaware (the &#8220;Bankruptcy Court&#8221;, and the filings</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> therein, the &#8220;Chapter 11 Filings</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8221;). The Debtors are seeking Bankruptcy Court</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> authorization to jointly administer</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> the chapter 11 c</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">ases (the </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8220;Chapter 11 Cases</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&#8221;) </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">under the caption &#8220;<I>In re </I><I>Hancock Fabrics, Inc.</I><I>,</I> <I>et al</I>.&#8221; Case No. 16-10296. The Debtors will continue to manage their properties and operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. </FONT></P>
<P id=PARA76 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA75 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I>DIP Financing</I></FONT></P>
<P id=PARA77 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA78 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><I></I>In connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in the Debtor-In-Possession Credit Agreement (the &#8220;DIP Credit Agreement&#8221;), that was entered into with the lenders from time to time party thereto (the &#8220;Lenders&#8221;) and Wells Fargo Bank, National Association, as Agent and Swing Line Lender, and GACP Finance Co., LLC, as Term Agent, upon the entry of an interim court order approving the DIP Credit Agreement. The DIP Credit Agreement provides for senior secured, super-priority debtor-in-possession financing facilities in an aggregate amount of up to $100,000,000 (the &#8220;DIP Facility&#8221;). The DIP Facility will become available upon the satisfaction of customary conditions precedent thereto, including the entry of an order of the Bankruptcy Court approving the DIP Facility on an interim basis.</FONT></P>
<P id=PARA80 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA79 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Hancock anticipates using the proceeds of the DIP Facility (a) after the entry of a final order of the Bankruptcy Court authorizing the DIP Facility (the &#8220;Final Order&#8221;), for the repayment in full in cash of all Hancock&#8217;s pre-petition first lien senior secured credit facility (other than contingent indemnification obligations), (b) to fund the fees, costs and expenses in connection with the DIP Credit Agreement, (c) to fund general corporate purposes, and (d) for working capital purposes in accordance with an approved budget acceptable to the Lenders (the &#8220;Budget&#8221;) and subject to a permitted variance, among other things.</FONT></P>
<P id=PARA81 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA82 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The DIP Facility consists of a revolving credit facility in a maximum principal amount of up to $80,000,000 and a term loan facility in the aggregate principal amount of $18,290,416.47, which, after the entry of the Final Order, will be used for the repayment of all existing obligations with respect to Hancock&#8217;s pre-petition senior secured term loan. </FONT></P>
<P id=PARA83 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA84 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The maturity date of the DIP Facility is the earliest of (i) six (6) months after the petition date, subject to extension by mutual consent, but in no event later than nine (9) months after the petition date, (ii) thirty (30) calendar days after the petition date if the Final Order is not entered, (iii) the effective date of a chapter&nbsp;11 plan of reorganization, (iv) the date of consummation of any sale of all or substantially all of the assets of the Debtors pursuant to section&nbsp;363 of the Bankruptcy Code, (v) the date of acceleration of the loans and the termination of the DIP commitments upon the occurrence of an event of default under the DIP Facility, and (vi) the filing of a motion by the Debtors seeking dismissal of the Chapter 11 Cases, the dismissal of the Chapter&nbsp;11 Cases, the filing of a motion by the Debtors seeking to convert the Chapter&nbsp;11 Cases to cases under chapter&nbsp;7 of the Bankruptcy Code, the conversion of the Chapter&nbsp;11 Cases to cases under chapter&nbsp;7 of the Bankruptcy Code, or the appointment of a trustee or examiner with expanded powers in any of the Chapter&nbsp;11 Cases. Interest on the outstanding principal amount of loans under the DIP Facility is a per annum rate equal to a base rate (determined with reference to the prime rate subject) plus 1.50%. Upon an event of default, all obligations under the DIP Facility will bear interest at a rate equal to the then current rate plus an additional 2% per annum.</FONT></P>
<P id=PARA85 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
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<DIV id=PGHDR160  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA160.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA86 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Pursuant to the terms of the DIP Credit Agreement, the domestic subsidiaries of Hancock guarantee Hancock&#8217;s obligations under the DIP Facility. Subject to certain exceptions, the DIP Facility is secured by (i) a first priority perfected security interest in all of Hancock&#8217;s unencumbered assets, (ii) second priority perfected liens and security interests in all of Hancock&#8217;s assets that are subject to certain prepetition liens pursuant to section 364(c)(3) of the Bankruptcy Code, and (iii) priming first-priority perfected liens and security interests in all of Hancock&#8217;s assets senior to certain consenting prepetition secured parties pursuant to sections 364(c)(2) and (d)(1) of the Bankruptcy Code. The security interests and liens are subject only to certain carve outs and permitted liens, as set forth in the DIP Credit Agreement. </FONT></P>
<P id=PARA87 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA88 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The DIP Facility is subject to certain covenants, including without limitation, related to the incurrence of additional debt, liens, the making of restricted payments, Hancock&#8217;s failure to comply with the approved budget and certain bankruptcy related covenants, in each case as set forth in the DIP Credit Agreement. The DIP Facility is also subject to certain mandatory prepayment events, including without limitation, upon the sale of certain assets and certain events of default.</FONT></P>
<P id=PARA89 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA90 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The foregoing description of the DIP Facility does not purport to be complete and is qualified in its entirety by reference to the DIP Credit Agreement, a copy of which will be filed as an exhibit to a subsequent report.</FONT></P>
<P id=PARA91 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
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<TR>
<TD style="WIDTH: 72pt; VERTICAL-ALIGN: top">
<P id=PARA95 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 2.03</B></FONT></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA96 style="MARGIN-BOTTOM: 0pt; TEXT-ALIGN: left; MARGIN-TOP: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Creation of a Direct Financial Obligation or Obligation under an Off Balance Sheet Arrangement of a Registrant.</B></FONT></P></TD></TR></TABLE>
<P id=PARA97 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA98 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The information set forth above in Item 1.03 of this report under &#8212;<I>DIP Financing</I> is hereby incorporated herein by reference. </FONT></P>
<P id=PARA99 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA161><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item </B><B>2</B><B>.0</B><B>4</B><B></FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA162><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Triggering Events That Accelerate or Increase a Direct Financial Obligation or an </B><B>Obligation under an Off-Balance Sheet Arrangement</B></P></FONT></B></TD></TR></TABLE>
<P id=PARA103 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT>&nbsp;</P>
<P id=PARA8 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On February 1, 2016, Wells Fargo Bank, National Association, in its capacity as administrative agent and collateral agent (the &#8220;Agent&#8221;), and GA Capital, LLC, in its capacity as term loan agent (the &#8220;Term Agent&#8221;), in each case under the credit agreement, dated as of April 22, 2015 (as amended prior to and in effect on the Petition Date, the &#8220;Pre-Petition Credit Agreement&#8221;), by and among Hancock, certain of its direct and indirect subsidiaries, the Agent, the Term Agent, and the lenders party thereto from time to time, delivered a written notice of default and acceleration (the &#8220;Notice of Default&#8221;) to Hancock asserting that one or more events of default had occurred with respect to the Pre-Petition Credit Agreement. Under the Notice of Default, (i) the Agent is terminating the lenders&#8217; obligations to make loans to Hancock, (ii) the Agent is demanding payment of a termination fee of $2,000,000, (iii) the Term Agent is demanding payment of a prepayment fee equal to $700,000, (iv) the Agent and the Term Agent are accelerating all sums owed by Hancock under the Pre-Petition Credit Agreement and (v) the Agent and the Term Agent are making demand for immediate payment of the amounts due under the Pre-Petition Credit Agreement, including the termination fee and the prepayment fee.</FONT></P>
<P id=PARA9 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt">&nbsp;</P>
<P id=PARA102 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The Debtors&#8217; Chapter 11 Filings described in Item 1.03 above constitute an event of default that accelerated obligations of the Debtors under the&nbsp;Pre-Petition Credit Agreement&nbsp;and the indenture, dated as of November 20, 2012, between Hancock and Deutsche Bank National Trust Company, as trustee thereunder, governing Hancock&#8217;s Floating Rate Series A Secured Notes Due 2017 (as amended prior to and in effect on the Petition Date, the &#8220;Indenture&#8221; and, together with the Pre-Petition Credit Agreement, the &#8220;Pre-Petition Debt Documents&#8221;) on the Petition Date.&nbsp; The Pre-Petition Debt Documents provide that as a result of the Chapter 11 Filings, the principal and accrued and unpaid interest and premiums, fees and all other amounts owed, if any, due thereunder are immediately due and payable. As of the Petition Date, an aggregate amount of approximately $79.9 million and approximately $8.4 million, including accrued and unpaid interest and premiums, fees and all other amounts owed, if any, were outstanding under the Pre-Petition Credit Agreement and the Indenture, respectively. Hancock believes any efforts to enforce such payment obligations under the Debt Documents, including pursuant to the Notice of Default,&nbsp;are automatically stayed as a result of the Chapter 11 Filings and the creditors&#8217; rights of enforcement in respect of the Debt Documents are subject to applicable provisions of the Bankruptcy Code. </FONT></P>
<P style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt">&nbsp;</P>
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<P id=PARA6><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 5.02</FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA7><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers</P></FONT></B></TD></TR></TABLE>
<P id=PARA4 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA3 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">On February 1, 2016, Neil Subin resigned as a member of the Board of Directors of Hancock, effective immediately. The resignation of Mr. Subin is not the result of a disagreement with Hancock on any matter relating to Hancock&#39;s operations, policies or practices.</FONT></P>
<P id=PARA5 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"></FONT></P>
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<P id=PARA163><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item </B><B>7.01</B><B></FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA164><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Regulation FD Disclosure</B></P></FONT></B></TD></TR></TABLE>
<P id=PARA109 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA108 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">A copy of the press release, dated February 2, 2016, announcing that the Debtors filed</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> voluntary petitions for relief under the </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Bankruptcy Code is attached hereto as Exhibit 99.1 and is incorporated herein by reference.</FONT></P>
<P id=PARA110 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA111 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">The information in this Item 7.01 on this Current Report on </FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Form 8-K is being furnished and shall not be deemed &#8220;filed&#8221; for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the &#8220;Exchange Act&#8221;), nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933, as amended, or the Exchange Act, e</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">xcept as shall be expressly set forth by specific reference in such filing. </FONT></P>
<P id=PARA112 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT></P>
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<DIV id=PGHDR165  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA165.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B></B></FONT></P>
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<P id=PARA166><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 8.01</FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA167><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Other Events</P></FONT></B></TD></TR></TABLE>
<P id=PARA115 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA116 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Hancock cautions that trading in securities of Hancock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for these securities may bear little or no relationship to the actual recovery, if any, by holders of the these securities in the Chapter 11 Cases. </FONT></P>
<P id=PARA117 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA168><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Item 9.01</FONT></B></P></TD>
<TD style="VERTICAL-ALIGN: top">
<P id=PARA169><B><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Financial Statements and Exhibits</P></FONT></B></TD></TR></TABLE>
<P id=PARA119 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA120 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits</FONT></P>
<P id=PARA121 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA122 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U>Exhibit Number</U></FONT></P></TD>
<TD style="WIDTH: 82%; VERTICAL-ALIGN: bottom">
<P id=PARA123 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><U>Description</U></FONT></P></TD></TR>
<TR>
<TD style="WIDTH: 18%; VERTICAL-ALIGN: top">
<P id=PARA124 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA125 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">99.1</FONT></P></TD>
<TD style="WIDTH: 82%; VERTICAL-ALIGN: bottom">
<P id=PARA126 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA127 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Press release issued by Hancock Fabrics, Inc. dated February 2, 2016.</FONT></P></TD></TR></TABLE>
<P id=PARA129 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA130 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>Forward Looking Statements </B></FONT></P>
<P id=PARA131 style="MARGIN-BOTTOM: 0pt; MARGIN-TOP: 0pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA132 style="TEXT-ALIGN: left; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">This Curren</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">t Report on Form 8-K contains &#8220;forward-looking statements&#8221; within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements often include words such as &#8220;believe,&#8221; &#8220;expect,&#8221; &#8220;project,&#8221; &#8220;anticipate,&#8221; &#8220;intend,&#8221; &#8220;plan,&#8221; &#8220;estimate,&#8221; &#8220;seek,&#8221; &#8220;will,&#8221; &#8220;may,&#8221; &#8220;would,&#8221; &#8220;should,&#8221; &#8220;could,&#8221; &#8220;forecasts&#8221; or similar expressions. These statements about Hancock&#8217;s</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> expectations, beliefs, plans, objectives, assumptions and future events are not statements of historical fact and reflect only Hancock&#8217;s</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> current expectations regarding these matters. Hancock&#8217;s</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> actual actions and results may differ materially from what is expressed or implied by these statements due to a variety of factors, including: (i) the potential adverse impact of the Chapter 11 Filings on Hancock&#8217;s liquidity or results of operations; (ii) changes in Hancock&#8217;s ability to meet financial obligations during the Chapter 11 Cases or to maintain contracts that are critical to Hancock&#8217;s operations; (iii) the outcome or timing of the Chapter 11 Cases; (iv) the effect of the Chapter 11 Filings on Hancock&#8217;s relationships with third parties, regulatory authorities and employees; (v) the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases, including proceedings that may be brought by third parties in connection with the Chapter 11 Cases; (vi) the Debtors&#8217; ability to obtain the approval of the Bankruptcy Court with respect to motions filed in the Chapter 11 Cases and the outcomes of Bankruptcy Court rulings and the Chapter 11 Cases in general; (vii) restrictions on the Debtors due to the terms of debtor-in-possession financing facilities and restrictions imposed by the Bankruptcy Court; (viii) the increased administrative costs related to the Chapter 11 Cases; (ix) Hancock&#8217;s ability to maintain adequate liquidity to fund operations during the Chapter 11 Cases and thereafter; (x) the effectiveness of the overall restructuring activities pursuant to the Chapter 11 Filings and any additional strategies Hancock may employ to address its liquidity and capital resources; and (xi) other factors listed from time to time in Hancock&#8217;s filings with Securities and Exchange Commission</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">. Forward-looking statements speak only as of the date on which they are made and Hancock</FONT><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"> undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.</FONT></P>
<P id=PARA133.1 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
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<DIV id=PGHDR133  style="WIDTH: 100%; TEXT-ALIGN: left">&nbsp;</DIV></DIV>
<P id=PARA133.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&nbsp;</FONT></P>
<P id=PARA135 style="TEXT-ALIGN: center; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif"><B>SIGNATURE</B></FONT></P>
<P id=PARA136 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
<P id=PARA137 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25; TEXT-INDENT: 36pt"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</FONT></P>
<P id=PARA138 style="TEXT-ALIGN: justify; MARGIN: 0pt; LINE-HEIGHT: 1.25"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman, Times, serif">&nbsp;</FONT></P>
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<P id=PARA170.2 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>HANCOCK FABRICS, INC. </P></TD>
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<P id=PARA170.12 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>Date: February 2, 2016</P></TD>
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<P id=PARA170.13 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By: </FONT></P></TD>
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<P id=PARA170.14 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/&nbsp;</FONT>Dennis Lyons</P></TD>
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<P id=PARA170.17 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>Name:</P></TD>
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<P id=PARA170.18 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>Dennis Lyons</P></TD>
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<P id=PARA170.22 style="MARGIN-BOTTOM: 0px; MARGIN-TOP: 0px"><FONT style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"></FONT>Senior Vice President and Chief Administrative</P></TD>
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<TD vAlign=top width="35%">Officer)</TD>
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hkfi20160201_8k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 2, 2016 (
February 1, 2016)
HANCOCK FABRICS, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
1-9482
64-0740905
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
One Fashion Way
Baldwyn, Mississippi 38824
(Address of Principal Executive Offices)
(662) 365-6000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01
Entry into a Material Definitive Agreement.
The information disclosed under Item 1.03 of this report under —
DIP Financing
is incorporated herein by reference.
Item
1
.0
3
Bankruptcy or Receivership
Chapter 11 Filings
On February 2, 2016 (the "Petition Date"), Hancock Fabrics, Inc. ("Hancock") and
all of Hancock's direct and indirect subsidiaries (collectively
with Hancock, the
"Debtors
")
filed
voluntary petitions for relief (the "Bankruptcy Petitions") under c
hapter 11 of t
itle 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court", and the filings
therein, the "Chapter 11 Filings
"). The Debtors are seeking Bankruptcy Court
authorization to jointly administer
the chapter 11 c
ases (the
"Chapter 11 Cases
")
under the caption "
In re
Hancock Fabrics, Inc.
,
et al
." Case No. 16-10296. The Debtors will continue to manage their properties and operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.
DIP Financing
In connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in the Debtor-In-Possession Credit Agreement (the "DIP Credit Agreement"), that was entered into with the lenders from time to time party thereto (the "Lenders") and Wells Fargo Bank, National Association, as Agent and Swing Line Lender, and GACP Finance Co., LLC, as Term Agent, upon the entry of an interim court order approving the DIP Credit Agreement. The DIP Credit Agreement provides for senior secured, super-priority debtor-in-possession financing facilities in an aggregate amount of up to $100,000,000 (the "DIP Facility"). The DIP Facility will become available upon the satisfaction of customary conditions precedent thereto, including the entry of an order of the Bankruptcy Court approving the DIP Facility on an interim basis.
Hancock anticipates using the proceeds of the DIP Facility (a) after the entry of a final order of the Bankruptcy Court authorizing the DIP Facility (the "Final Order"), for the repayment in full in cash of all Hancock's pre-petition first lien senior secured credit facility (other than contingent indemnification obligations), (b) to fund the fees, costs and expenses in connection with the DIP Credit Agreement, (c) to fund general corporate purposes, and (d) for working capital purposes in accordance with an approved budget acceptable to the Lenders (the "Budget") and subject to a permitted variance, among other things.
The DIP Facility consists of a revolving credit facility in a maximum principal amount of up to $80,000,000 and a term loan facility in the aggregate principal amount of $18,290,416.47, which, after the entry of the Final Order, will be used for the repayment of all existing obligations with respect to Hancock's pre-petition senior secured term loan.
The maturity date of the DIP Facility is the earliest of (i) six (6) months after the petition date, subject to extension by mutual consent, but in no event later than nine (9) months after the petition date, (ii) thirty (30) calendar days after the petition date if the Final Order is not entered, (iii) the effective date of a chapter 11 plan of reorganization, (iv) the date of consummation of any sale of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code, (v) the date of acceleration of the loans and the termination of the DIP commitments upon the occurrence of an event of default under the DIP Facility, and (vi) the filing of a motion by the Debtors seeking dismissal of the Chapter 11 Cases, the dismissal of the Chapter 11 Cases, the filing of a motion by the Debtors seeking to convert the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, the conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, or the appointment of a trustee or examiner with expanded powers in any of the Chapter 11 Cases. Interest on the outstanding principal amount of loans under the DIP Facility is a per annum rate equal to a base rate (determined with reference to the prime rate subject) plus 1.50%. Upon an event of default, all obligations under the DIP Facility will bear interest at a rate equal to the then current rate plus an additional 2% per annum.
Pursuant to the terms of the DIP Credit Agreement, the domestic subsidiaries of Hancock guarantee Hancock's obligations under the DIP Facility. Subject to certain exceptions, the DIP Facility is secured by (i) a first priority perfected security interest in all of Hancock's unencumbered assets, (ii) second priority perfected liens and security interests in all of Hancock's assets that are subject to certain prepetition liens pursuant to section 364(c)(3) of the Bankruptcy Code, and (iii) priming first-priority perfected liens and security interests in all of Hancock's assets senior to certain consenting prepetition secured parties pursuant to sections 364(c)(2) and (d)(1) of the Bankruptcy Code. The security interests and liens are subject only to certain carve outs and permitted liens, as set forth in the DIP Credit Agreement.
The DIP Facility is subject to certain covenants, including without limitation, related to the incurrence of additional debt, liens, the making of restricted payments, Hancock's failure to comply with the approved budget and certain bankruptcy related covenants, in each case as set forth in the DIP Credit Agreement. The DIP Facility is also subject to certain mandatory prepayment events, including without limitation, upon the sale of certain assets and certain events of default.
The foregoing description of the DIP Facility does not purport to be complete and is qualified in its entirety by reference to the DIP Credit Agreement, a copy of which will be filed as an exhibit to a subsequent report.
Item 2.03
Creation of a Direct Financial Obligation or Obligation under an Off Balance Sheet Arrangement of a Registrant.
The information set forth above in Item 1.03 of this report under —
DIP Financing
is hereby incorporated herein by reference.
Item
2
.0
4
Triggering Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement
On February 1, 2016, Wells Fargo Bank, National Association, in its capacity as administrative agent and collateral agent (the "Agent"), and GA Capital, LLC, in its capacity as term loan agent (the "Term Agent"), in each case under the credit agreement, dated as of April 22, 2015 (as amended prior to and in effect on the Petition Date, the "Pre-Petition Credit Agreement"), by and among Hancock, certain of its direct and indirect subsidiaries, the Agent, the Term Agent, and the lenders party thereto from time to time, delivered a written notice of default and acceleration (the "Notice of Default") to Hancock asserting that one or more events of default had occurred with respect to the Pre-Petition Credit Agreement. Under the Notice of Default, (i) the Agent is terminating the lenders' obligations to make loans to Hancock, (ii) the Agent is demanding payment of a termination fee of $2,000,000, (iii) the Term Agent is demanding payment of a prepayment fee equal to $700,000, (iv) the Agent and the Term Agent are accelerating all sums owed by Hancock under the Pre-Petition Credit Agreement and (v) the Agent and the Term Agent are making demand for immediate payment of the amounts due under the Pre-Petition Credit Agreement, including the termination fee and the prepayment fee.
The Debtors' Chapter 11 Filings described in Item 1.03 above constitute an event of default that accelerated obligations of the Debtors under the Pre-Petition Credit Agreement and the indenture, dated as of November 20, 2012, between Hancock and Deutsche Bank National Trust Company, as trustee thereunder, governing Hancock's Floating Rate Series A Secured Notes Due 2017 (as amended prior to and in effect on the Petition Date, the "Indenture" and, together with the Pre-Petition Credit Agreement, the "Pre-Petition Debt Documents") on the Petition Date.  The Pre-Petition Debt Documents provide that as a result of the Chapter 11 Filings, the principal and accrued and unpaid interest and premiums, fees and all other amounts owed, if any, due thereunder are immediately due and payable. As of the Petition Date, an aggregate amount of approximately $79.9 million and approximately $8.4 million, including accrued and unpaid interest and premiums, fees and all other amounts owed, if any, were outstanding under the Pre-Petition Credit Agreement and the Indenture, respectively. Hancock believes any efforts to enforce such payment obligations under the Debt Documents, including pursuant to the Notice of Default, are automatically stayed as a result of the Chapter 11 Filings and the creditors' rights of enforcement in respect of the Debt Documents are subject to applicable provisions of the Bankruptcy Code.
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On February 1, 2016, Neil Subin resigned as a member of the Board of Directors of Hancock, effective immediately. The resignation of Mr. Subin is not the result of a disagreement with Hancock on any matter relating to Hancock's operations, policies or practices.
Item
7.01
Regulation FD Disclosure
A copy of the press release, dated February 2, 2016, announcing that the Debtors filed
voluntary petitions for relief under the
Bankruptcy Code is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 on this Current Report on
Form 8-K is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933, as amended, or the Exchange Act, e
xcept as shall be expressly set forth by specific reference in such filing.
Item 8.01
Other Events
Hancock cautions that trading in securities of Hancock during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for these securities may bear little or no relationship to the actual recovery, if any, by holders of the these securities in the Chapter 11 Cases.
Item 9.01
Financial Statements and Exhibits
(d)         Exhibits
Exhibit Number
Description
99.1
Press release issued by Hancock Fabrics, Inc. dated February 2, 2016.
Forward Looking Statements
This Curren
t Report on Form 8-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements often include words such as "believe," "expect," "project," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts" or similar expressions. These statements about Hancock's
expectations, beliefs, plans, objectives, assumptions and future events are not statements of historical fact and reflect only Hancock's
current expectations regarding these matters. Hancock's
actual actions and results may differ materially from what is expressed or implied by these statements due to a variety of factors, including: (i) the potential adverse impact of the Chapter 11 Filings on Hancock's liquidity or results of operations; (ii) changes in Hancock's ability to meet financial obligations during the Chapter 11 Cases or to maintain contracts that are critical to Hancock's operations; (iii) the outcome or timing of the Chapter 11 Cases; (iv) the effect of the Chapter 11 Filings on Hancock's relationships with third parties, regulatory authorities and employees; (v) the actions and decisions of creditors, regulators and other third parties that have an interest in the Chapter 11 Cases, including proceedings that may be brought by third parties in connection with the Chapter 11 Cases; (vi) the Debtors' ability to obtain the approval of the Bankruptcy Court with respect to motions filed in the Chapter 11 Cases and the outcomes of Bankruptcy Court rulings and the Chapter 11 Cases in general; (vii) restrictions on the Debtors due to the terms of debtor-in-possession financing facilities and restrictions imposed by the Bankruptcy Court; (viii) the increased administrative costs related to the Chapter 11 Cases; (ix) Hancock's ability to maintain adequate liquidity to fund operations during the Chapter 11 Cases and thereafter; (x) the effectiveness of the overall restructuring activities pursuant to the Chapter 11 Filings and any additional strategies Hancock may employ to address its liquidity and capital resources; and (xi) other factors listed from time to time in Hancock's filings with Securities and Exchange Commission
. Forward-looking statements speak only as of the date on which they are made and Hancock
undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HANCOCK FABRICS, INC.
Date: February 2, 2016
By:
/s/
Dennis Lyons
Name:
Dennis Lyons
Title:
Senior Vice President and Chief Administrative
Officer)