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Rating Action: Moody's upgraded Jo-Ann's stores CFR to B2 from Caa1; first lien term upgraded to B2Global Credit Research - 18 Mar 2021New York, March 18, 2021 -- Moody's Investors Service, ("Moody's") upgraded Jo-Ann Stores LLC.'s ("Jo-Ann") corporate family rating to B2 from Caa1, its probability of default rating to B2-PD from Caa1-PD, and its first lien term loan to B2 from Caa1. Concurrently, Moody's assigned a speculative grade liquidity rating of SGL-2. The outlook remains stable.The upgrade reflects social considerations including the company's better than expected operating performance during the COVID-19 pandemic. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The upgrade is further supported by governance considerations including the company's plan to repay its second lien senior secured term loan using proceeds from its recent initial public offering.Moody's estimates pro-forma debt/EBITDA of 3.8x for the fiscal year ending January 30, 2021 based on the completion of the equity offering and the repayment of its second lien loan. Jo-Ann has good liquidity evidenced by cash balances at the end of Q4 of $27 million and $86 million of borrowings on its $500 million revolving credit facility.Upgrades:..Issuer: Jo-Ann Stores LLC..... Probability of Default Rating, Upgraded to B2-PD from Caa1-PD.... Corporate Family Rating, Upgraded to B2 from Caa1....Senior Secured 1st Lien Bank Credit Facility, Upgraded to B2 (LGD4) from Caa1 (LGD3) Assignments: ..Issuer: Jo-Ann Stores LLC. .... Speculative Grade Liquidity Rating, Assigned SGL-2 Outlook Actions: ..Issuer: Jo-Ann Stores LLC. ....Outlook, Remains Stable RATINGS RATIONALE Jo-Ann Stores LLC.'s B2 corporate family rating reflects the company's outperformance as consumer spending has shifted to favor its key core sewing and craft categories during the pandemic. The company's small size and the risk of business normalization as the pandemic subsides remain constraints to the rating. Governance risk is also a key rating constraint given the company's financial sponsor ownership, can lead to aggressive financial strategies. Jo-Ann has been supported by the demand for personal protective equipment such as face mask that is expected to continue, and the improving demand for do-it-yourself arts and crafts as well as its relatively higher margins relative to other retail segments and good liquidity. The company's essential service status enabled the vast majority of its stores to either remain fully open and or provide curbside and buy-online-pick-up-in-store services which mitigated the impact at the onset of the pandemic.The stable outlook reflects expectations that although consumer spending patterns will normalize over the next 12-18 months the company can maintain good liquidity and credit metrics reflective of its B2 rating.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRating could be upgraded to the extent the company increases its scale and continues to post consistent sales and operating earnings growth while maintaining good liquidity. Financial strategies would need to be balanced and sponsor ownership reduced significantly. Quantitatively, an upgrade would require EBIT/interest to be sustained above 2.25x and leverage sustained below 3.5x.Ratings could be downgraded if liquidity deteriorates for any reason or financial strategies become aggressive. Quantitatively, an upgrade would require EBIT/interest to be sustained above 1.5x or leverage sustained above 5.5x.JOANN, Inc., (formerly known as Jo-Ann Stores Holdings Inc.) is the parent company of Jo-Ann Stores LLC. and a leading retailer of fabrics and craft supplies offering a wide range of products for quilting, apparel, craft and home décor sewing. Jo-Ann operates 855 retail stores in 49 states as of January 30, 2021. Revenues for the latest twelve months ended January 30, 2021 were approximately $2.8 billion. Joann Inc. is a publicly traded company on the NASDAQ under the symbol "JOAN" and is majority owned by affiliates of Leonard Green & Partners L.P which owns in excess of 66% of its equity.The principal methodology used in these ratings was Retail Industry published in May 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. 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For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Christina Boni Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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