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Bed Bath & Beyond files for bankruptcy protection

A “Store Closing” banner at a Bed Bath & Beyond store in Farmingdale, New York, on Friday, June 6. January 2023.

Johnny Milano | Bloomberg | Getty Images

Bed Bath & Beyond on Sunday filed for Chapter 11 bankruptcy protection after a series of last-ditch attempts to raise enough equity to keep the business afloat failed at the eleventh hour.

The struggling home goods retailer has been warning of potential bankruptcy since early January, when it issued a “going concern” warning that it may not have the cash to cover expenses after a dismal holiday season.

“Bed Bath & Beyond Inc. today announced that it and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey to effect an orderly liquidation of the business. while conducting a limited marketing process to solicit interest in one or more sales of some or all of the assets, it said in a statement on Sunday.

“The company’s 360 Bed Bath & Beyond and 120 buybuy BABY stores and websites will remain open and continue to serve customers as the company begins its efforts to complete the closure of its retail locations.”

Bed Bath has been hanging on by a thread ever since, but has refused to go down without a fight. It secured what was then considered a Hail Mary stock offering in early February that was expected to inject more than $1 billion in equity into Bed Bath, but the plan faltered and brought in only $360 million, the company said.

In late March, Bed Bath announced a new stock offering it hoped would bring in $300 million, but that news sent its stock price tumbling and it struggled to raise the funds it hoped the offering would bring. As of April 10, the company had sold approximately 100.1 million shares and raised just $48.5 million.

In filings, the company warned if it did not collect the expected dividend from the offering, it would likely have to file for bankruptcy protection.

Days after the second share offering was announced, Bed Bath said it had partnered with liquidator Hilco Global to boost inventory levels. Under the agreement, Hilco’s subsidiary ReStore Capital agreed to purchase up to $120 million in merchandise from the company’s key suppliers after relations with Bed Bath’s suppliers deteriorated due to liquidity problems.

However, the plans ultimately proved futile and were not enough to keep the lights on.

The retailer has struggled to maintain relationships with its suppliers and has struggled with low inventory levels, lagging sales and a rapidly dwindling cash pile.

Heading into the holiday season, Bed Bath had trouble keeping shelves stocked, and due to liquidity problems, some suppliers began asking for advance payments, the company said in the securities filing.

Chief executive Sue Grove had led the company through an attempted turnaround she hoped could save the business, but that effort coincided with high inflation affecting consumer spending while rising interest rates slowed the housing market.

In addition, consumers who had spent 2020 and 2021 staying at home and updating their living spaces amid the pandemic now spent time traveling, dining out and other out-of-home experiences.

In mid-January, the company sought to find a buyer willing to keep it afloat with an infusion of cash. Soon, however, Bed Bath disclosed in a securities filing that it did not have enough cash to pay its debt and had defaulted on its line of credit with JPMorgan.

The company was able to pay its interest payments using financing from the initial public offering, but at the time it warned that it would “likely” have to file for bankruptcy and see its assets liquidated if the deal did not go as planned.

The company had loans with JPMorgan and lender Sixth Street that were reduced at the end of March after the second stock offering was announced. At that time, its total revolving commitment fell from $565 million to $300 million, and its revolving credit facility was reduced from $225 million to $175 million. Under the reduced credit agreements, Bed Bath was on the hook for monthly interest payments.

The company said it was trying to reduce costs by reducing capital expenditures, closing stores and renegotiating leases, but warned in filings that the efforts “may not be successful.”

At a popular Bed Bath outpost in New York City, a since-laid-off employee recently told CNBC that workers were standing around unsure what to do after the company suddenly suspended in-store pickup and delivery. The worker was told that liquidators would arrive the next day and soon learned that employees would not receive severance pay after more than two decades with the company.

“It just went so fast,” the worker said.

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