By Suzanne Kapner and Andrew Scurria
The clock is ticking for Bed Bath & Beyond Inc.
The home-goods chain's lenders have cut off credit and it hasn't secured a buyer to acquire its business, leaving it with dwindling options to avoid a bankruptcy filing. With chapter 11 looking increasingly likely, the focus shifts to what's next for the retailer and what shape it might take coming out of a restructuring. Here is what we know.
What is the state of Bed Bath & Beyond's finances?
The company's banks have determined it has defaulted on its credit lines and are calling for immediate repayment of all outstanding loans. Companies in Bed Bath's situation often reach agreements with their lenders on plans to file for bankruptcy protection that put a pause on the requirement to repay debt. The default notice the chain said it received last week triggers an increase in its interest rate and a requirement to put up cash collateral to back letters of credit.
The Union, N.J., company has $550 million in loans outstanding from banks led by JPMorgan Chase & Co. and another $375 million from a facility provided by Sixth Street Partners, according to a recent securities filing.
As of late November, it had $154 million in unrestricted cash and equivalents.
What happens next?
Bed Bath & Beyond has to make interest payments on its outstanding debt Feb. 1 but is widely expected among industry observers and investors to skip them. Skipping the payments doesn't automatically trigger bankruptcy but it typically starts a grace period, a time in which companies discuss repayment options or seek alternate arrangements before bondholders and other creditors can take legal action. It also has to fund payroll at the end of this week for employees' checks.
The company is expected to file for chapter 11 bankruptcy soon, The Wall Street Journal has reported, citing people familiar with the matter.
In the event of store closures, property owners and retail analysts say that they are more confident about finding new tenants for those spaces than in years past.
What does a bankruptcy filing mean for Bed Bath & Beyond's business?
Filing for bankruptcy protection doesn't mean the company is going out of business. In a potential chapter 11 filing, the company would likely seek financing that would see it through the bankruptcy process or look to sell assets to repay debts.
However the company's financial troubles are already leading to empty shelves. Many of the chain's vendors have stopped shipping goods in recent weeks because they are worried the retailer might not be able to repay them. Empty shelves portend store closures.
Shares in Bed Bath & Beyond also could continue to trade through a bankruptcy reorganization but their future value is uncertain. Equity holders typically are at a lower priority than other creditors in bankruptcy and they could be wiped out in the event of a liquidation.
Has it started closing stores?
The chain last week said it was closing an additional 87 of its flagship stores and its entire Harmon chain of drugstores. Those closings are in addition to a plan announced in August to shut 150 lower-performing Bed Bath & Beyond locations. If the company doesn't get access to financing, it might need to close all or most of its remaining stores.
As of late November, the company had 949 stores, including 762 Bed Bath & Beyond stores in all 50 states, Washington, D.C., Puerto Rico and Canada. It also operates Buybuy Baby stores. The company said it was closing five of those locations.
Here is a list of locations that the company said are closing.
Why is Bed Bath & Beyond struggling?
The company's downfall is partly self-inflicted and partly beyond its control. The company's founders didn't foresee the e-commerce boom, leaving it particularly vulnerable to competition from Amazon.com. When new management took over in 2019, it launched a plan to ward off rivals that involved scaling back on national brands and introducing private-label products to replace them.
One problem: The floor-to-ceiling piles of brand-name products were a big part of the chain's appeal, so the changes alienated customers. Then came Covid-19, which led to factory closures and supply-chain bottlenecks that delayed the arrival of its private-label goods. Even when they arrived, the products didn't resonate.
The chain has been walking back some of those moves, but getting some of those vendors back has been a challenge. It doesn't help when they aren't getting paid.
Who founded Bed Bath & Beyond?
Warren Eisenberg and Leonard Feinstein founded the company aiming to offer name-brand goods of towels, linens and bedding at a discount. Messrs. Eisenberg, now 92 years old, and Feinstein, 85, invested $50,000 each to open the first two Bed 'n Bath stores in 1971, after visiting a similar store in Boston operated by a cousin of Mr. Eisenberg's wife, Mitzi.
The retail chain was able to grow nationally and eventually changed to the name Bed Bath & Beyond in 1987.
The men stepped down as executives in 2003 and sold all their stock after they left the company's board of directors in 2019 after activist investors called for changes.
Write to Suzanne Kapner at Suzanne.Kapner@dowjones.com and Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
January 30, 2023 16:09 ET (21:09 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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