Troubled home-goods retailer Bed Bath & Beyond Inc. disclosed in a filing Thursday that it was in default on loans that have been called in, sending its stock plunging.
The filing comes just three weeks after Bed Bath & Beyond
said it may need to declare bankruptcy. The struggling company, which was recently threatened with having its stock delisted for being late with its Form 10-Q quarterly report, finally filed its quarterly report with the U.S. Securities and Exchange Commission on Thursday.
The filing also contained information that Bed Bath & Beyond had defaulted on loans earlier this month. Executives were informed Wednesday by banker JPMorgan Chase & Co.
that the debt was due immediately.
Howard Ehrenberg, a bankruptcy and reorganization practice partner at the law firm Greenspoon Marder, thinks that Bed Bath & Beyond’s bankruptcy filing could be imminent. “My best assumption is that BBBY will file before the bank takes action to seize the assets,” he told MarketWatch via email Thursday. “The loan documents most assuredly give the bank the right to take control of the company and the inventory.”
“If there really was an equity-for-debt deal, it would have been announced to blunt the impact of the default notice,” he added.
“Bed Bath & Beyond has edged closer toward bankruptcy after defaulting on its loans as it struggles to find the cash it needs to repay its debts,” City Index markets analyst Joshua Warner told MarketWatch, via email early Friday. “Creditors are now demanding immediate repayment and it simply doesn’t have the money as sales continue to decline, losses swell, and it burns through cash.”
Bed Bath & Beyond needs to raise funds and quickly if it is to avoid collapse, according to Warner. “A bankruptcy filing could be just around the corner and the clock is ticking,” he added.
The company appears to be running out of options, according to the analyst. “Existing lenders have not shown interest in providing fresh financing to back the company’s turnaround, new lenders are unlikely to emerge, and raising equity also looks challenging,” he told MarketWatch. “It could still sell assets, with the buybuyBABY brand thought to be attracting some interest, but Bed Bath & Beyond will be negotiating from a weak position and could struggle to secure the price tag it wants. It may be exploring all options, but they appear to be dwindling.”
The beleaguered retailer’s stock plunged 22.2% on Thursday before rallying Friday. Bed Bath & Beyond’s stock is up 5%, outpacing the S&P 500 Index’s
gain of 0.2%. The stock has fallen 83% in the last 12 months, outpacing the S&P 500 index’s
decline of 8.2%.
The bad news continues to unfold at Bed Bath & Beyond, according to credit-monitoring and risk-management company Creditsafe. “I’ve been holding out hope that the retailer would be able to turn things around or at least secure financing to get it back on its feet,” said Matthew Debbage, Creditsafe’s CEO for the Americas and Asia, in a statement emailed to MarketWatch. “But I doubt any lenders will be willing to open their coffers to Bed Bath & Beyond right now.”
“I hate to say it, but it looks like the only real option left is filing for bankruptcy,” he added.
Creditsafe’s reports show that Bed Bath & Beyond has 18 Uniform Commercial Code filings against it, with the latest one filed in June 2022. “UCC filings allow lenders to seize listed property as a way of recouping loan funds in case a borrower defaults,” said Debbage. “And we know that Bed Bath & Beyond is in default.”
Debbage expects to see liquidation sales nationwide and mass store closures. “The first stores to go will likely be the ones with high operating costs and low revenue growth,” he said.
“As we consider all paths and strategic alternatives, we continue to work with our advisers and implement actions to manage our business as efficiently as possible,” a Bed Bath & Beyond spokesperson said in an email Thursday. “As is our practice, we do not comment on speculation. We will update all stakeholders on our plans as they develop and finalize.”
On Jan. 10, Bed Bath & Beyond announced the closure of almost 130 stores, just days after saying it may need to declare bankruptcy. The announcement that the sometime meme-stock darling may need to declare bankruptcy sent Bed Bath & Beyond’s stock sinking toward a 30-year low and followed a turbulent few years marked by strategic missteps, cash burn, challenging underlying business trends and the impact of the COVID-19 pandemic.
Additional reporting by Jeremy Owens.