Hancock Fabrics Receives Approval of ''First Day Motions''

  
    
  
  
    
      Hancock Fabrics, Inc. (NYSE: HKF), which announced yesterday it had 
      filed a voluntary petition for Chapter 11 relief in the United States 
      Bankruptcy Court for the District of Delaware, reported today that it 
      received bankruptcy court approval of a $105 million DIP 
      (debtor-in-possession) financing arrangement with Wachovia Bank, N.A., 
      in which Hancock will gain additional borrowing capacity necessary to 
      operate successfully under Chapter 11. In addition, the Company has 
      reached an agreement in principle with another lender for an additional 
      loan of up to $17.5 million.
    
    
      Hancock also received bankruptcy court approval for a number of “First 
      Day Motions” to support its employees, 
      customers, vendors and other stakeholders. Among other things, the court 
      approved requests to continue to pay Hancock’s 
      employees and to fulfill the needs of the Company’s 
      customers.
    
    
      Forward-Looking Statement
    
    
      Certain statements made in this press release may constitute “forward-looking 
      statements” within the meaning of the federal 
      securities laws. These forward-looking statements involve certain 
      risks and uncertainties. Actual results may differ materially 
      from the expected results described in the forward-looking statements. 
      There are a number of factors that could cause the Company’s 
      actual results to differ materially from the expected results described 
      in the Company’s forward-looking statements.
    
    
      There can be no assurance that the Company’s 
      restructuring will be successful. Risk factors related to the 
      restructuring efforts that could cause actual results to differ from 
      these forward-looking statements include, but are not limited to, the 
      following: (a) the Company’s ability 
      to continue as a going concern; (b) the Company’s 
      ability to obtain adequate financing; (c) the Company’s 
      success in obtaining various court approvals; (d) the ability of the 
      Company to maintain reasonable business relationships with its 
      merchandise and other vendors. Other risk factors are included in 
      the Company’s Annual Report on Form 10-K for 
      the fiscal year ended January 28, 2006 and other Company filings with 
      the Securities and Exchange Commission. The Company undertakes no 
      obligation to publicly revise or update these forward-looking 
      statements, whether as a result of new information or future events.
    
    
      Hancock Fabrics, Inc. – America's Fabric 
      Store – is committed to serving creative 
      enthusiasts with a complete selection of fashion and home decorating 
      textiles, sewing accessories, needlecraft supplies and sewing machines, 
      through retail stores and an Internet store at www.hancockfabrics.com.