Creditors are demanding immediate repayment of Bed Bath & Beyond Inc.’s debt, according to a regulatory filing. The retailer said it received a default notice from JPMorgan Chase & Co. after it failed to prepay an overadvance and meet other creditor protections.
Bed Bath & Beyond listed around $2.1 billion of obligations it owed as of Nov. 2022. The default notice also requires the company to cash collateralize certain debt. It also adds a 2% annual default rate interest penalty on obligations.
Bed Bath & Beyond likely to file for bankruptcy
“Generally, in situations like this where a company defaults on their loan agreement our experience is, if they don’t come to an agreement with their lenders, the likelihood of a bankruptcy filing within the next 30 days is relatively high,” said Dennis Cantalupo, chief executive officer of Pulse Ratings, a credit-rating and consulting firm. Bed Bath & Beyond had said earlier this year that it was considering all options to fix its strained finances. This included the possibility of filing for bankruptcy.
“At this time, the company does not have sufficient resources to repay the amounts under the Credit Facilities and this will lead the company to consider all strategic alternatives, including restructuring its debt under the U.S. Bankruptcy Code,” the filing said.
In an emailed statement, a Bed Bath & Beyond spokeswoman said the company is continuing to “work with our advisers and implement actions to manage our business as efficiently as possible.” She added: “We will update all stakeholders on our plans as they develop and finalize.”
The company has begun speaking with potential lenders that would fund the firm during bankruptcy proceedings.
“I’m expecting a filing any day,” said Cristina Fernández, a Telsey Advisory Group analyst. “I’m not sure what other avenues there are for them at the moment.”
Fernández said she had visited a Bed Bath & Beyond store in Paramus, New Jersey, in recent days and noticed that many shelves were bare — echoing the observations of many shoppers in recent months as the retailer struggles to convince suppliers to supply merchandise.
Bed Bath & Beyond’s revolving credit line, administered by JPMorgan, is secured by a claim on its inventory, the fluctuating value of which determines the amount of credit available at any given point. The company must provide regular updates to the bank regarding the value of inventory it has on hand, calculated at an agreed discount.
The filing indicates that the value of Bed Bath & Beyond inventory during the most recent update to JPMorgan had fallen below the amount the company had already borrowed from its revolver. The mismatch breaches the terms of the loan. It must be remedied by a cash payment in order to avoid a default.
Separately, Bed Bath & Beyond said it had appointed Carol Flaton to its board. Flaton specialized in restructuring and turnarounds at consultancy AlixPartners and also at the bank Lazard. The retailer said she will be paid $30,000 per month.
The ubiquitous U.S. brand, founded in 1971 in Union, New Jersey, Bed Bath & Beyond was once a staple of going-to-college shopping lists and wedding registries.
The firm’s decline has been years in the making. It has accelerated in recent months as suppliers become increasingly concerned about the retailer’s future. Suppliers have demanded to receive payments in advance. Other manufacturers have lowered their credit limits with the retailer in order to reduce the risk of not getting paid.
That limited the retailer’s merchandise during the pivotal holiday season. This exacerbated a vicious cycle of falling inventory levels, declining foot traffic and declining revenue. Thus, making it harder to pay suppliers.
Bed Bath & Beyond Inc. ranks No. 31 in the 2022 Digital Commerce 360 Top 1000, a database of the largest e-retailers in North America.
Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.
Follow us on LinkedIn, Twitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.